Question

According to the Stolper-Samuelson theorem, would you expect U.S. skilled workers to benefit from free trade worldwide? Briefly explain your answer.

Answer 1

Yes, as per the theorem of Stolper-Samuelson we would expect that the skilled workers in United States to gain from free trade worldwide. The Stolper-Samuelson theorem states that when the resources move from the import-competing sector to the export sector, the returns to the nation's abundant resource will rise and returns to the nation's scarce resource will fall. Thus there will be an increase returns to capital will increase and returns to labor will fall in a capital-abundant nation and vice-versa in a labor-abundant nation. In similar way, the abundance of skilled manpower in United States will induce an increase to the abundant factor in U.S. due to returns attained