Consider the following model of immigration to the United States. Potential migrants originate in country 0, the source country. For each individual, lifetime income if they remain in the source country (denoted by YO) is given by the equation YO = MO + RO(S) where S measures the skill level of each person, with positive values of S indicating above-average skills, negative values of S indicating below-average skills, and S equal to zero for the average person. Lifetime income if a person immigrates to the United States (denoted by Y1) also varies with skills, as described by the equation Y1 = M1 + R1(S) %3D The parameters MO, M1, RO, and R1 characterize the lifetime income distributions in the two countries. Let C represent the total costs incurred when immigrating to the United States, including any psychic costs associated with leaving one's home country. Assume the following: мо»М1-С>0 and RO>R1>0 Assume that individuals seek to maximize their lifetime income.

Consider the following model of immigration to the United States. Potential migrants originate in country 0, the source country. For each individual, lifetime income if they remain in the source country (denoted by YO) is given by the equation YO = MO + RO(S) where S measures the skill level of each person, with positive values of S indicating above-average skills, negative values of S indicating below-average skills, and S equal to zero for the average person. Lifetime income if a person immigrates to the United States (denoted by Y1) also varies with skills, as described by the equation Y1 = M1 + R1(S) %3D The parameters MO, M1, RO, and R1 characterize the lifetime income distributions in the two countries. Let C represent the total costs incurred when immigrating to the United States, including any psychic costs associated with leaving one's home country. Assume the following: мо»М1-С>0 and RO>R1>0 Assume that individuals seek to maximize their lifetime income.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter17: Income, Poverty, And Health Care

Section: Chapter Questions

Problem 1P

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Suppose that potential migrants make decisions only based on comparisons of their expected incomes. Now suppose the rural wage is $1 per day. Urban modern sector employment can be obtained with 0.25 probability and pays $3 per day. The urban traditional sector pays $0.40 per day. (d) What simplifying assumptions are needed to make this a valid conclusion? (e) Now, what would the urban traditional sector daily income have to be to induce no net rural-urban migration? (f) If wages in all sectors are inflexible, what else adjusts in this model to lead to equilibrium (how much does it adjust and what is the intuition)?
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