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    Incentive for migration between Australia and Sri-Lanka

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    I have been asked to suppose that Australia, a land (K)-abundant country, and Sri-Lanka, a labor (L)-abundant country, both produce labor and land intensive goods with the same technology. Following the logic of the Heckscher-Ohlin model, what will be the incentive for migration once trade is established between these two countries? Now, suppose that a tariff by one country creates an incentive for labor migration. From which country to which country will be the migration? Explain how you arrived at your answers.

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    If Australia is a capital abundant country, this means that the country has more capital than labor and hence it would require labor to utilize its capital. Now as Sri Lanka is a labor abundant country, the country has more labor than the capital. This indicates that there is unemployment in the country ...

    Solution Summary

    The expert examines incentives for migration between Australia and Sri-Lanka.