Question

According to the Rybczynski theorem, which of the following statements are correct? Select one or more: a. In the source nation, the immigration will lead to a decrease in the output of capital-intensive products. b. In the receiving country, the immigration will cause an increase in the output of both the labor-intensive and the capital-intensive goods. c. In the source nation, the immigration will lead to a decrease in the output of labor-intensive products. d. In the receiving country, the immigration will cause an increase in the output of the labor-intensive good and a decrease in the output of the capital-intensive good.

Answer 1

Option C,D.

• According to the Rybczynski theorem, in the receiving country, the immigration will cause an increase in the output of the labour intensive good and a decrease in the output of the capital intensive good.
• This theorem states that when one of the factors of production undergoes endowment, then it will lead to the expansion of the output of a particular while at the same time, the output of another good declines and vice versa.
• When a receiving country is labour intensive, the output of a good in the immigration increases rapidly while at the same time the output of the capital intensive good decreases.
• But FDI, leads to an increase in the output of the capital intensive goods than the outputs of the labour intensive goods.