| Jim Whitney | March 16, 2011 |
Factor endowment-based trade (the Heckscher-Ohlin model): Who wins? Who loses?
Consider a world with two types of goods:
capital-intensive advanced goods (A), and
labor-intensive basic goods (B).
Suppose the home country (H) is capital-abundant.
Different people have different income situations and different consumption patterns too. Fill in the table to indicate whether "Heckscher-Ohlin" trade would, in the long run, make the economic well-being of each of the following in the home country rise (+), fall (-), remain the same (0) or change in an uncertain direction (?):
| Consumption pattern | |||
| Income situation: | Consumes only basic goods |
Consumes some of both goods |
Consumes only advanced goods |
| An owner of capital used in the advanced goods industry | |||
| An owner of labor employed in the advanced goods industry | |||
| An owner of capital used in the basic goods industry | |||
| An owner of labor employed in the basic goods industry | |||