LABOR ECONOMICS
8th Edition
ISBN: 9781260004724
Author: BORJAS
Publisher: RENT MCG
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Question
Chapter 3, Problem 15P
(a)
To determine
Explain the changes in the domestic and foreign labor in order to restore the given condition.
(b)
To determine
Explain the three policies that the domestic country could employ if it wants to reverse the outflow of labor.
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A production function has two inputs: domestic labor (Edom) and foreign labor (Efor.) The market is originally in equilibrium as shown below, and the production budget is fixed. Suppose a shock occurs that increases the marginal product of domestic labor. Assuming no changes in domestic or foreign wages, what will happen to the quantities of domestic and foreign labor employed?
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