What does the Stolper-Samuelson theorem predict will happen to the real returns to factors of production after trade occurs?
A) Labor and capital must be used together in production, and there is no room for competition for remuneration.
B) Capital owners always get the "gains from trade."
C) Resources used intensively in export industries (such as labor in China and capital in the United States) will see an increase in their returns, whereas the resources used intensively in import-competing industries will see a decline in their return.
D) Poor nations will always get the least returns to their factors of production.

Question

Quizplus · Accepted Answer

The Stolper-Samuelson theorem predicts that resources used intensively in export industries will see an increase in their returns, whereas the resources used intensively in import-competing industries will see a decline in their return. This is because as a country begins to specialize in its comparative advantage, the demand for factors of production used intensively in that industry will increase, driving up their price. Conversely, the demand for factors of production used in import-competing industries will decrease, leading to a decline in their price.

What Does the Stolper-Samuelson Theorem Predict Will Happen to the Real