Comparative advantage in closed economy

[archived_user]

Reviewing some practice problems and i’m having a difficult time with the concept of this.
Lets say country A is a closed economy with an abundance of labor and comparative advantage in production of product XYZ
Country B is open with an abundance of capital
When trade for product XYZ is opened between the two, country A experiences a favorable impact on labor.
Why is the favorable impact for country A labor? Aren’t they getting a favorable impact from the capital from country B? If country B had little capital, wouldn’t country A’s benefit be unchanged which makes me believe country A’s benefit is from the capital not labor?
thoughts?

 

[archived_user]

bump

 

[archived_user]

Perhaps the point is that having an abundance of labor with no capital to pay for it isn’t worth much. When trade opens, country B’s capital can pay for country A’s labor.
I haven’t looked this up; this is off the top of my head. But is seems reasonable. (I know: that should be an indication that it’s wrong.)

 

[archived_user]

i know this is over a year old, but attempting to explain/answer questions can’t hurt…
according to Hecksher-Ohlin Model, the factor (labor vs capital) that your country is abundant/endowed in will benefit when trade is opened up, vs. the less abundant factor.
-this is b/c the increased demand for your abundant factor, drives it’s price UP relative to what it used to be in your country - this in turn means factor prices (wages) go UP too, so now the good that you were abundant in and now exporting, are going to earn more income b/c of trade.
-in contrast, the factor that you were LESS abundant in (capital) and the good that it produced, is now relatively cheaper in the opened economy, so factor prices are going to go down in domestic country, as well as revenues to produce it. but obviously the idea is your country will be producing much less of it and importing it.
i believe that’s the concept here..