What would factor price equalization imply happens to wages
A small industrialized country initially has no trading links with a large, but closed, cen- trally-planned economy that shares a border. Wages per hour for skilled and unskilled work- ers are $25 and $12, respectively, in the industrialized economy. The centrally-planned economy suddenly undergoes a peaceful revolution and the border with its industrial neigh- bor is completely opened to trade. In the former centrally-planned economy, skilled workers get paid $5 an hour and unskilled workers get paid $2 an hour. Productivity in the former centrally-planned economy is one-?fth that of the industrial country in all sectors and for all workers. What would factor price equalization imply happens to wages in the industrial country?
