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According to the Specific Factor Model, international trade produces winners and losers within a country because...

According to the Specific Factor Model, international trade produces winners and losers within a country because in the short run, some production factors are specific to the production of a particular product or service. true or false with justification why?

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Answer #1

True, lets assume that there are only two nations in the world that is US and India, US have capital and they export computers and India is more labor abundant and they produce pizza, When these two nations trade, the demand for capital in US and demand for labor in india will increase, so, the interest rate and wages will also increase,

now that US is importing pizza from india its own labor will see lower demand for their services and hence a lower wage, similarly In India capitalist will suffer. So, trade produce winner and looser depending on what the nation is producing.

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