Suppose there are 2 countries, Home and Foreign, two factors of production, capital and labor and two products, food and cloth. Home has 100 units of labor and 200 units of capital, while Foreign has 300 units of labor and 150 units of capital.
\(Q_{F}=L_{F}^{0.8}K_{F}^{0.2}\)
\(Q_{c}=L_{c}^{0.2}K_{c}^{0.8}\)
Suppose that Foreign has 3000 units of labor and 1500 units of capital (it is 10 times bigger than before). Will the change in wages that followed trade liberalization in the Home country be bigger or smaller?