Analyzing real wage and rental rate in labor abundant country.
Suppose when Russia opens to trade, it imports automobiles, a capital-intensive good.
a. As per to the Heckscher-Ohlin theorem, is Russia capital abundant or labor abundant? Briefly explain.
b. Illustrate what is the impact of opening trade on the real wage in Russia? Briefly explain.
c. What is the impact of opening trade on the real rental rate on capital in Russia? Briefly explain.
d. Which group (capital owners or labor) in Russia would support policies to limit free trade? Briefly explain.