Explain the wage gap/inequality between skilled and unskilled workers using the Heckscher-Ohlin-Samuelson theorem

Expert Solution

This theorem deals with the phenomenon that countries produce basically two kinds of goods:-

1) labour intensive

2) capital intensive

The countries with abundance of labour (population) specialises in labour intensive production e.g shoe making and countries with abundance of capital specialises in capital intensive technique such as, crop production, mining etc.

The countries take part in trade on the basis of of these specialisation. But every country do not want to rely only on trade and want to become self reliant. For this they invest in human capital. When a human gets good education, he becomes skilled labour, and to value that and motivate mike skill training, skilled labours are paid more. Skilled labours helps in exploring various methods of production and trade and unskilled just follows what they are asked to do. Therefore, to encourage the skilled labours, they are paid more.

Rahul Sunny answered 2 years ago

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