Final answer:
The Heckscher-Ohlin model suggests that a country abundant in unskilled labor would export unskilled labor-intensive goods, which could raise unskilled wages, but the statement is considered false as actual wage changes depend on complex factors. For high-skilled labor, despite increased supply, wages rose due to an even greater increase in demand. For low-skilled labor, reducing low-skilled immigration would shift supply left and could raise wages.
Step-by-step explanation:
The Heckscher-Ohlin model predicts that a country will export products that use its abundant factors intensively, and import products that use its scarce factors intensively. If a country is abundant in unskilled labor, this model would predict the country to export goods that are unskilled labor-intensive, which in turn should increase the demand for unskilled labor, potentially raising the wages of unskilled workers relative to skilled labor. However, the reality is more complex and factors such as technology, education, and global trade dynamics must be considered. Therefore, the answer is B. False.
Economists use the demand and supply model to explain wage shifts. As the supply of U.S. workers with college degrees has increased, shown by a shift in the supply curve from So to S₁, one might expect a decrease in the equilibrium wage for high-skilled labor. Nevertheless, due to a greater demand (shift from Do to D₁), combined with the increased supply, there has been a higher wage for high-skilled labor. This combination of increased supply and demand has resulted in a shift from Eo to E₁, and an increase in high-skilled labor wages.
In the context of low-skilled labor, if a reduction in low-skilled immigration occurs, this would shift the supply curve of low-skilled labor to the left, which should raise the equilibrium wage for such labor. However, this is a separate consideration and does not directly relate to the Heckscher-Ohlin model's predictions regarding wage changes resulting from factor endowments.