There are two countries, Home and Foreign. The two countries are identical except that Home has...

There are two countries, Home and Foreign. The two countries are identical except that Home has a labor force of 100 and Foreign has a labor force of 200. Given this allocation of labor across Home and Foreign, the value of the marginal product of labor in Home is 30 and the value of the marginal product of labor in Foreign is 20. If labor were to be free to move, the wage in both countries would be25.

fi mmigration were free between countries, how much would the value of output change in Foreign?

Expert Solution

Since Foreign has more supply of labour compared to that of home country, this means that there will be less employment opportunities in Foreign country and more supply of goods and services in Foreign compared to that of Home.

If the immigration is free between the two countries, it will cause labour from Foreign to move to home country in search of more employment. This will lead to decrease in the supply of goods and services in Foreign country. The result of this will be decrease in the value of output in Foreign country.

Rahul Sunny answered 2 years ago

There are two countries, Home and Foreign. The two countries are identical except that Home has...

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There are two countries, Home and Foreign. The two countries are identical except that Home has...

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