Question

What does theory tell us about the effects of unskilled labor migration into a particular region?Specifically, discuss the intra-regional effects of this immigration on unskilled wages, product mix, and the returns to other factors (including, possibly, skilled labor, capital, and/or land). In your answer, contrast the predictions of the specific factors model with those of the Heckscher-Ohlin model, and state the assumptions you are invoking when discussing each. Finally, drawing on readings and class discussions, summarize the empirical evidence on these predictions.

Answer 1

Answer - When labors who are unskilled migrate into some other region looking for jobs they usually end up doing small jobs and are paid a little over than their home regions. Being unskilled they find it very difficult to fimd a job. If we look into the situation economically then the laborers add to the unemployed population which is bad fpr the economy and acts as an obstacle for the economic growth of that region. But if we look on the positive side of it then such region gets cheap labor for the work to be done. Due to migration of such unskilled labors the employed population gets divided into unskilled, semi skilled and skilled people. According to hechacher ohlin model the region or country which uses it’s abundant resources ends up exporting it as they are able to produce it in good quantities and on the other hand when a country uses it’s scarce resources then it ends up importing sich item as it is not able to gully realise the optimum output needed. Thus according to hechscher if a country has abundant resources and a lot of unskilled labor then the country has an upper hand of using it’s cheap labor and reducing it’s cost of production. Thus it starts importing such good and this helps in maintaing the balance of trade and also leads to economic growth. In this model the assumption of two nations being equally efficient is used and also the technology used to produce is different for two different goods and the returns are said to be constant in nature.