Question:
I have been asked to suppose that Australia, a land (K)-abundant country, and Sri-Lanka, a labor (L)-abundant country, both produce labor and land intensive goods with the same technology. Following the logic of the Heckscher-Ohlin model, what will be the incentive for migration once trade is established between these two countries? Now, suppose that a tariff by one country creates an incentive for labor migration. From which country to which country will be the migration? Explain how you arrived at your answers.