Econ 335 CW1 9/24/18 1. Consider the following: Countr Narania Alagaësia 15 mill

Question

Econ 335 CW1 9/24/18 1. Consider the following: Countr Narania Alagaësia 15 million Labor 10 million Capital $1 billion $2 billior According to the assumption of the H-O model, which country labor abundant? 2. Consider the following: Country Gondor Mordor Share of Capital in the World 10% 15% Share of GDP in the World 15% 1296 ntief's paradox, which country is According to the definition of resource abundance used to resolve Leo capital abundant? 3. Consider the following: Country Arendelle Share of GDP in the Share of Labor in the World 15% 12% Share of Effective Labor in the World 10% 15% World 15% 12% Macondo According to the definition of effective resource abundance used to resolve Leontief's paradox, which country is labor abundant? a)

Explanation / Answer

1. According to Heckscher-Ohlin model, endowment is given as:

Capital/Labour

1/10 for Narania = 0.1

and 2/15 for Alagaesia = 0.13

Hence, Alagaesia is labour abundant.

It is also clear that Labor/capital is more for Narania hence it is capital abundant.

2. Leontief's paradox in economics is that a country with a higher capital per worker has a lower capital/labor ratio in exports than in imports.

Hence, Gondor is more capital abundant as it is clear that Gondor is more abundant with capital as it includeds human capital too.

3. Definition of effective labor: Labor measured in productive effort instead of time spent.

Hence, Arendelle is labour abundant as labour is more productive and prduces more of GDP

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