Term Paper-The Heckscher-Ohlin Trade Theory
The Heckscher-Ohlin Trade Theory is about how two countries can get greater gains from trading with each other if they have different resources – one have more labor and the other have more capital (that is technical equipment and machinery).
By specializing in production, and by trading with other countries, it is possible for countries to increase their incomes. Even though countries as a whole benefit from specialization and international trade, all groups in society, workers and capitalists, do not gain according to the Heckscher-Ohlin theory. If international trade leads a country to specialize in producing goods that require lots of workers and little capital, such a specialization increases wages (which benefits the workers) but decreases the income of the capital owners. But the country as a whole benefits because the gain of the workers is bigger than the loss of the capital owners.
After playing the game (estimated to last about 15 minutes), answer the following questions in the form of a short essay. Your completed essay should be at least 250 words in length:
1. Did your selected country have more labor or capital?
2. Why did you select this particular country?
3. Did your selected trading partner have more labor or capital?
4. Why did you select this particular trading partner?
5. Did you increase or decrease the welfare of your country by engaging in international trade? Why?
