Suppose a worker's skill is captured by his efficiency units of labor. In country A, the distribution of efficiency units in the population is such that worker 1 has one efficiency unit, worker 2 has two efficiency units, and so on. There are 100 workers in the population. In deciding whet her to migrate to country B, these workers compare the present value of their future wage earnings at home (wA) with their potential wage earnings in country в (w»). The relationship between wages and skills in each of the two countries is given by wA = 100 +s and wg = 110 +0.75s where s is the number of efficiency units of the worker. (a) Assume there are no migration costs. What is the efficiency of the marginal worker in country A, i.e. the worker who is indifferent between staying in country A or moving to country B? (b) What is the average number of efficiency units among immigrants to country B from country A? Assume that the marginal worker stays. (c) Suppose the cost of migrating from country A to country B is 5. Then what is the efficiency of the marginal worker in country A?
Suppose a worker's skill is captured by his efficiency units of labor. In country A, the distribution of efficiency units in the population is such that worker 1 has one efficiency unit, worker 2 has two efficiency units, and so on. There are 100 workers in the population. In deciding whet her to migrate to country B, these workers compare the present value of their future wage earnings at home (wA) with their potential wage earnings in country в (w»). The relationship between wages and skills in each of the two countries is given by wA = 100 +s and wg = 110 +0.75s where s is the number of efficiency units of the worker. (a) Assume there are no migration costs. What is the efficiency of the marginal worker in country A, i.e. the worker who is indifferent between staying in country A or moving to country B? (b) What is the average number of efficiency units among immigrants to country B from country A? Assume that the marginal worker stays. (c) Suppose the cost of migrating from country A to country B is 5. Then what is the efficiency of the marginal worker in country A?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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