Problem: Use the Heckscher-Ohlin/factor proportions framework with two factors, skilled and unskilled labor, to evaluate the following arguments. Suppose X is more skill intensive than Y. Suppose the US is more skill abundant than the rest of the world. Explain your answer.
1) Average wages are higher in the US exportable sector.
2) This suggests that there would be benefits to the economy of subsidizing employment in production of exportables (the high average wage sector).
3) A subsidy for the employment of unskilled labor in the sector with high average wages raises the market wage for unskilled workers.