Answer to Question #292824 in Economics for Hafsa

Question

What were the results of empirical tests on the relationship between human capital and international trade? Natural resources and international trade? What is the status of the H–O theory today?

Answer 1

With the average skilled worker working in a country with a higher level of human capital-augmenting technology, the output of skill-intensive goods increases. This results in a decrease in the price of skill-intensive goods.

The H-O model more accurately describes international trade patterns in modern times (post WWII) due to the increased ability of transferring knowledge/ production technologies between countries, mainly focusing on factorial differences such as labor force and resource allocation as to why countries trade with each other.