2.1 Migration in the HO model
Consider the standard Heckscher-Ohlin model, with two goods: computers and t-shirts. The two goods are produced with two factors of production skilled labor and unskilled labor, and the production of computers is skilled-labor intensive relative to the production of t-shirts. All countries in the world have access to the same production technologies for producing these goods.
1. Without the need to provide any mathematical details, discuss the effects that a move to free trade will have on the wages paid to skilled and unskilled workers in a country (call it Home) with a large
??????endowment of skilled labor relative to unskilled labor (a skilled-labor-abundant country). Feel free to appeal to any theorems you know, without needing to prove them. Discuss the same effects from the point of view of an unskilled-labor-abundant country (call it Foreign).
2. When there is free trade are there any incentives for skilled workers to migrate across countries? If yes, from which country to which one?
3. If trade is not free, from which country to which country would the model predict skilled workers should be migrating to? Do you find this realistic? If not, what assumption of the model would you relax to generate more realistic predictions?