Question

How can international trade enhance economic efficiency? How can immigration enhance economic efficiency?

Answer 1

Improvements in production efficiency mean that countries with the same amount of resources can produce more goods and services. To put it another way, productivity increases for the given resource endowments available for production use. To achieve changes in the quality of production, resources within the economy must be transferred between industries. That means some industries have to grow while others have to contract. Exactly which industries are expanding and contracting will depend on the underlying stimulus or trade base. Different trading models emphasize different trade stimuli.

Thus as trade opens, either the country is specialized in the products in which it has a comparative technological advantage, or production is shifted to industries which use the relatively abundant factors of the country most intensively, or production is shifted to products in which the country has relatively less demand compared to the rest of the world, or production shifts to products which exhibit economies of scale in production.

More immigrants means more worked hours in the economy. Immigration often also improves labor supply by increasing the involvement of women in the labor force through the process of substantially reducing care costs.Second, an increase in skilled migration can directly increase the aggregate level of human capital, while low-skilled migration can indirectly boost skilled labor supply by increasing the skilled women's participation in the labor force.

Migrants are different from the host population and possibly see things differently from the native group, enabling them to challenge pre-existing businesses and further drive productivity benefits. And in connection with this, immigrants help connect capital, talent and ideas globally, because they bring international connections and are more willing to explore globally, identifying new opportunities and potential innovations