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Capital intensive vs labor intensive goods capital

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Capital intensive vs. labor intensive goods Capital abundant vs. labor abundant countries
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The Heckscher-Ohlin (HO) Theorem A capital-abundant country will have the comparative advantage in producing capital- intensive goods and thus export capital- intensive goods. Similarly, a labor-abundant country will have the comparative advantage in producing labor-intensive goods and thus export labor- intensive goods.
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The Stolper-Samuelson Theorem Free international trade benefits the abundant factor and harms the scarce factor. Notes: (1) The Stolper-Samuelson theorem establishes a reason for some groups in a society to oppose international trade. Thus, it provides insights into why governments may impose barriers to trade. (2) The country overall gains from trade.
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9 Chapter 4 Trade Model Extensions and Applications Intra-industry trade in differentiated goods is mainly due to increasing returns to scale , also known as economies of scales (i.e., a firm’s per-unit costs decrease with output.)
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A Model of Outsourcing Because the U.S. is abundant in skilled labor, it will make sense for the firms to send the most unskilled- labor intensive activities abroad and keep the more- skilled labor intensive activities at Home. In figure 7.2 that might be all activities to the left of the vertical line A. This is referred to as slicing the value chain . Activities to the left of line A are sent abroad because the cost savings from paying lower wages in Foreign are greatest for the less-skilled labor intensive activities.
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11 Effects of Reduced Trade Costs on Outsourcing Lowering trade costs makes it easier to outsource to low- wage countries. The activity cut-off line shifts to B.
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