Mexico has an abundance of unskilled labor and the United States has an abundance of skilled labor.The Heckscher-Ohlin model implies that trade between the United States and Mexico will lead to a decrease in the wages of unskilled labor in the United States and an increase in the wages of skilled labor in the United States.

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Jamella Gamble · Accepted Answer

Final Answer : True, Explanation :  According to the Heckscher-Ohlin model, countries will specialize in the production of goods and services that use their abundant factors of production more intensively, leading to a change in relative prices and factor returns. In the case of the United States and Mexico, the model suggests that the US will export goods that use skilled labor more intensively, while importing goods that use unskilled labor more intensively. This will lead to an increase in the demand for skilled labor in the US and a decrease in the demand for unskilled labor, thereby causing the wages of skilled labor to rise and the wages of unskilled labor to fall. In Mexico, the opposite will happen, as the demand for unskilled labor increases and the demand for skilled labor decreases, leading to an increase in the wages of unskilled labor and a decrease in the wages of skilled labor.

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