LABOR ECONOMICS
8th Edition
ISBN: 9781260004724
Author: BORJAS
Publisher: RENT MCG
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Chapter 4, Problem 4P
To determine
The market clearing wage rate with and without immigration.
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The last three decades in the United States have been characterized by a very wide gap between the wages of those with more education and those with less. Suppose that workers eventually adjust to this gap by investing more in education, with the result that the wages of less skilled workers rise faster than those of the more-skilled (so that the wage gap between the two falls). How would a decline in the wage gap between the skilled and the unskilled affect immigration to the United States?
Suppose that the marginal revenue product of U.S. labor is given by MRP = 250 - L. Also, suppose that a total of Ln = 150 native-born U.S. workers supply their labor inelastically.
Assume further that the government allows 50 immigrant workers, who are perfect substitutes for native-born workers, to enter the United States.
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- The statements relate to immigration or inequity as it relates to immigration. Identify each statement as either true or false. Statement 1: Countries with even slightly higher standards of living should expect an influx of immigration from their neighboring countries if those countries have a lower standard of living. Statement 2: There is empirical evidence that immigration leads to large increases in unemployment, which causes wages to drop drastically. Statement 3: As a potential solution to an influx of immigration, Case, Fair, and Oster (2012) cite a study by the International Monetary Fund (IMF) stating that free trade can help to reduce inequity, thereby reducing the need for immigration. Statement 4: Immigration is a local, city‑wide concern as opposed to being a national, country‑wide concern because immigrants stay in the city where they first arrive. Statement 5: Technological change will not cause low‑skilled workers to immigrate to another country with a higher…arrow_forwardLet market demand for domestic workers be represented by Ed = 1000 - 50w where Ed is domestic labor demanded and w is the hourly wage. Suppose the domestic labor supply is represented by Es = 115w - 821. Now suppose that 106 immigrants that are perfect substitutes for native workers enter the market and their labor supply is perfectly inelastic. What is the equilibrium wage for all workers in this market after the immigrants enter?arrow_forwardComplements Show the effects of immigration on the host country's labor market when domestic and foreign labor are perfect complements. Show the effects on worker and producer surplus.arrow_forward
- Substitutes Show the effects of immigration on the host country's labor market when domestic and foreign labor are perfect substitutes. Show the effects on worker and producer surplus.arrow_forwardIn addition to it being illegal to enter the US without a visa or to over-stay one’s visa, it is also illegal for US employers to hire undocumented or “illegal” immigrants. Meanwhile, federal US enforcement of immigration laws tends to concentrate resources on reducing illegal immigration rather than on prosecuting US firms for employing undocumented workers. Using supply and demand analysis, show what would happen to the wage and employment level of undocumented workers if the government pursued more active enforcement of employers. According to your model, what would happen to the wage and employment level of documented workers?arrow_forwardThe table below shows the quantity demanded and supplied at various wage rates for a competitive market. Wage Rate Quantity of Workers Demanded Quantity of Workers Supplied $100 5 50 90 10 45 80 20 40 70 35 35 60 50 30 If the workers form a union and negotiate a weekly wage of $90, how many workers will be supplied and demanded? Multiple Choice The quantity demand will be 10 and the quantity supplied will be 35. The quantity demanded will be 10 and the quantity supplied will be 45. The quantity demand and supplied will both be 35. The quantity demanded will be 35 and the quantity supplied will be 45.arrow_forward
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