Question

Is India more likely to restrict its imports of L - intensive or K - intensive commodities? Why? What effect is this likely to have on the distribution of income between labor and capital in India?

Answer 1

India is more likely to restrict imports of L(Labor) intensive commodities since it will decrease the labor wages in India since it is already L(Labor) intensive and producing labor intensive goods and increase in imports of L intensive products will further increase supply of labor intensive goods and this will decrease demand for L(Labor) for producing labor intensive products.

Due to increase in imports of L intensive commodities, less income will be distributed to labor and more capital will be distributed to capital which is a scarce factor of production in India. Since due to decrease in demand of labor, its wages will get decreased and wage rates for capital will get increased which is a scarce factor of production.