International Economic Problem Problem 1 (Immigration-Short Run): Home produces fish using unskilled

Aug 17th, 2016
Studypool Tutor
Price: $15 USD

Tutor description

International Economic Problem Problem 1 (Immigration-Short Run): Home produces fish using unskilled labor (U) and capital (K) and computers using skilled (S) and (U). Unskilled labor is mobile between industries. Capital and skilled labor are specific to their industries. Goods prices are fixed on world markets. 1a. Suppose that Home experiences an inflow of unskilled workers. How does this inflow affect the real wage paid to skilled and unskilled labor? 1b. Now suppose instead that Home experiences an inflow of skilled workers. How does this inflow affect the real wage paid to skilled and unskilled labor? Problem 2 (Immigration-Short Run): Use the global beaker diagram (see figure 5-14 in the book) to analyze the following problem. Home and Foreign initially have the same wage when political conflicts occur within Home. A substantial number of workers (the mobile factor) flee home and enter the foreign work force instead. 2a. How does the exodus of workers affe

Word Count: 3375
Showing Page: 1/6
Answer---1---aThe simplest case is one where the economy produces only one output good with a constantreturns to scale technology. A constant return to scale technology is a technology whereoutput is doubled if all factors of production are doubled. The three factors of productionused in our economy are capital, skilled labour, and unskilled labour. Assume that the rate ofreturn to capital (the interest rate) is set by the world market, and supply of capital istherefore perfectly elastic. Furthermore, assume that labour supply of both skill groups iscompletely inelastic. This means that workers are willing to work at whatever wage is offeredto them.We will relax this assumption later. Finally, assume that the skill composition of immigrantsdiffers from that of native workers. For illustration, we will consider the extreme case whereall immigrants are low-skilled. Immigration will now lead to an excess supply of unskilledlabour at the pre-immigration wages. Because unskilled labour is in excess supply, firms willtherefore be able to satisfy their demand for labour even at lower wages. This leads to adecrease in wages of unskilled workers, which, in turn, increases demand, until all unskilledworkers (immigrants and natives) are employed, but at a lower wage than the pre-migrationwage.Accordingly, low-skilled native workers lose as a consequence of immigration. However, asupply shock of unskilled workers leads to relative scarcity of skilled workers in ourecon

Review from student

Studypool Student
" Outstanding Job!!!! "
Ask your homework questions. Receive quality answers!

Type your question here (or upload an image)

1821 tutors are online

Brown University





1271 Tutors

California Institute of Technology




2131 Tutors

Carnegie Mellon University




982 Tutors

Columbia University





1256 Tutors

Dartmouth University





2113 Tutors

Emory University





2279 Tutors

Harvard University





599 Tutors

Massachusetts Institute of Technology



2319 Tutors

New York University





1645 Tutors

Notre Dam University





1911 Tutors

Oklahoma University





2122 Tutors

Pennsylvania State University





932 Tutors

Princeton University





1211 Tutors

Stanford University





983 Tutors

University of California





1282 Tutors

Oxford University





123 Tutors

Yale University





2325 Tutors