Question

Suppose that a relatively capital-abundant country is exporting the capitalintensive good and importing the labor-intensive good, but that the “specificfactors” model of Chapter 8 applies rather than the Heckscher-Ohlin model. Assess the effect on the return to labor of the imposition of a tariff on the laborintensive good.

Answer 1

Come back to work will ascend as expanded local generation because of tax leads to more noteworthy interest for work. In any case, it will increment as it were. But it will increase only. On the other hand more exports in capital intensive products raise profits and demand for labor.

Thus wages will rise in export sector. Labor will move from import substitution sector to export oriented sector. This will increment indeed compensation in import substitution segment. Consequently if work is portable and capital stable wages of work will rise