Answer to Question #98344 in Macroeconomics for annie

Question

Starting with 2000’s capital in the world became increasingly mobile. According to the mainstream labor market model, assuming labor costs are the only factor the capital owners take into account, which countries are the ones capital will move from, and which countries are the ones capital will move in? Explain your answer.

Answer 1

Capital is going to move from the countries, which experience surplus of this factor of production. Usually, these are the developed countries of the world. In turn, they are going to experience lack of labor force;. That is why they will be interested in imports of labor force from the developing countries. The developing countries are going to be the recipients of capital, since they now experience lack of capital.