Economics question

[Deleted member 4644]

Country A and Country B. A has $1 million in capital per worker. B has $100,000. All else equal, same # of workers and consumption preferences, and assuming autarky, will Country A have higher wages?

Ive been researching this for a while, and I think yes.. but I'm not sure..

Thanks in advance.

Edit: I know country A will focus on capital intensive goods, but will worker wages be higher?

 

[ElFenix]

country A should have much higher marginal production rates than country B, so it is possible for it to be that way.

 

[Colt45]

depends on the laws. the bourgeois will suck as much as they can from the proletariat.

 

[Ronstang]

Originally posted by: LordSeganI know country A will focus on capital intensive goods, but will worker wages be higher?

Only if they are unionized.

 

[Deleted member 4644]

Would this be a valid reponse:

Using basic economic models, several predictions can be made about Country A and Country B while in autarky. Country A has $1 million capital per worker, and thus is capital abundant relative to Country B. If the factor price of labor (wage) is designated w, and the factor price of capital is designated r, Country A will have a relatively high w/r ratio (powerpoint, Prof. McPherson, U. North Texas). Workers would produce, and earn, more. This effect would be limited only by the fact that capital would be subject to diminishing marginal productivity. At a certain point, Country A?s capital would have a minimal effect on its production.

 

[DaWhim]

yea, what system are country a and country b running? lassiz-faire?

 

[Deleted member 4644]

Yes, two factor free system

 

[DaWhim]

if everything is the same, it seems that country A is $900,000 wealthier than country B. why wouldn't country A workers earn more?

 

[Deleted member 4644]

DaWhim I think that is the correct conclusion. However a few other factors such as consumer preferences and diminising productivity could get in the way of that outcome. The prompt was not very clear....