With an abundance of low-priced labour relative to the United States, it is no surprise that China, India and other developing countries specialize in the production of labour-intensive products. For similar reasons, the United States will specialize in the production of goods that are human- and physical capital-intensive because of the relative abundance of a highly-educated labour force and technically sophisticated equipment in the United States.
This division of global production should yield a higher global output of both types of goods that would be the case if each country attempted to produce both of these goods itself. For example, the United States would produce more expensive labour-intensive goods because of its more expensive labour and the developing countries would produce more expensive human and physical capital-intensive goods because of their relative scarcity of these inputs. This logic implies that the United States is unlikely to be a significant global competitor in the production green technologies that are not relatively intensive in the human and physical capital.
Nevertheless, during the early stages of the development of a new technology, the United States has a comparative advantage in the production of the products enabled by this innovation. However, once these technologies become well-understood and production processes are designed that can make use of less- skilled labour, production will migrate to countries with less expensive labour.
Ans- China, India, and other developing countries focus on labor-intensive products with their advantage of cheap labor, whereas the US prioritizes capital-intensive goods due to its highly-educated workforce and advanced equipment, resulting in a higher global output; however, the US is unlikely to emerge as a significant competitor in labor-light green technologies as production tends to relocate to countries with lower labor costs once the technology becomes established.
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