LABOR ECONOMICS
8th Edition
ISBN: 9781260004724
Author: BORJAS
Publisher: RENT MCG
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Question
Chapter 9, Problem 10P
(a)
To determine
Determine why the discrimination may explain more than 8 cents of the 20 cent differential.
(b)
To determine
Determine why discrimination may explain less than 8 cents of the 20 cent differential.
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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 whether 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
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The relationship between wages and skills in each of the two countries is given by
WA = 100 + s
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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
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A or moving to country B?
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from country A? Assume that the marginal worker stays.
(c) Suppose the cost of migrating from…
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 whether 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
B (wB).
The relationship between wages and skills in each of the two countries is given by
WA = 100 + s
and
WB = 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…
Discuss Factor Intensity In detail.
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