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28 Sep 2019
An economy consists of two regions, the North and the South. Theshort-run elasticity of labor demand in each region is -0.5. Laborsupply is perfectly inelastic within both regions. The labor marketis initially in an economywide equilibrium, with 600,000 peopleemployed in the North and 400,000 in the South at a wage of $15 perhour. Suddenly, 20,000 people immigrate from abroad and initiallysettle in the South. They possess the same skills as the nativeresidents and also supply their labor inelastically.
a. What will be the effect of this immigration on wages in each ofthe regions in the short run (before any migration between theNorth and the South occurs)?
b. Suppose 1,000 native-born persons per year migrate from theSouth to the North in response to every dollar differential in thehourly wage between the two regions. What will be the ratio ofwages in the two regions after the first-year native labor respondsto the entry of the immigrants?
c. What will be the effect of this immigration on wages andemployment in each of the regions in the long run (after nativeworkers respond by moving across regions to take advantage ofwhatever wage differentials may exist)? Assume labor demand doesnot change in either region.
An economy consists of two regions, the North and the South. Theshort-run elasticity of labor demand in each region is -0.5. Laborsupply is perfectly inelastic within both regions. The labor marketis initially in an economywide equilibrium, with 600,000 peopleemployed in the North and 400,000 in the South at a wage of $15 perhour. Suddenly, 20,000 people immigrate from abroad and initiallysettle in the South. They possess the same skills as the nativeresidents and also supply their labor inelastically.
a. What will be the effect of this immigration on wages in each ofthe regions in the short run (before any migration between theNorth and the South occurs)?
b. Suppose 1,000 native-born persons per year migrate from theSouth to the North in response to every dollar differential in thehourly wage between the two regions. What will be the ratio ofwages in the two regions after the first-year native labor respondsto the entry of the immigrants?
c. What will be the effect of this immigration on wages andemployment in each of the regions in the long run (after nativeworkers respond by moving across regions to take advantage ofwhatever wage differentials may exist)? Assume labor demand doesnot change in either region.
a. What will be the effect of this immigration on wages in each ofthe regions in the short run (before any migration between theNorth and the South occurs)?
b. Suppose 1,000 native-born persons per year migrate from theSouth to the North in response to every dollar differential in thehourly wage between the two regions. What will be the ratio ofwages in the two regions after the first-year native labor respondsto the entry of the immigrants?
c. What will be the effect of this immigration on wages andemployment in each of the regions in the long run (after nativeworkers respond by moving across regions to take advantage ofwhatever wage differentials may exist)? Assume labor demand doesnot change in either region.
Yusra AneesLv10
28 Sep 2019
