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The Heckscher-Ohlin theory predicts that the opening of trade between a land-abundant country and a labor-abundant...

The Heckscher-Ohlin theory predicts that the opening of trade between a land-abundant country and a labor-abundant country should result in:

higher rents and wages in both countries.

lower rents and wages in both countries.

higher rents in the labor-abundant country and higher wages in the land-abundant country.

higher wages in the labor-abundant country and higher rents in the land-abundant country.

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Answer #1

Higher wages in the labor-abundant country and higher rents in the land-abundant country.

H-O model examines the role of resources difference in international trade. This model shows that comparative advantage is influenced by interaction between resources of countries and technology of production. Since HO model emphasise the inter relation between proportion in which different factors of production are available in different countries and the proportion in which they are used in producing different good. So, it is also referred as factor proportion theory.

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