Question

1. In his 1990 paper “The Impact of the Mariel Boatlift on the Miami Labor Market” David Card argued that the sudden large influx of relatively unskilled workers from Cuba into Miami (a greater than 10% increase in the unskilled labor force) had “virtually no effect on the wages or unemployment of less-skilled workers.”

a.- First use a Specific Factors Model type diagram of the labor market to analyze the predicted impact of an increase of the labor force (this model would predict that wages would indeed fall).

b.- Next, suppose that we add labor to the economy under the assumption that product prices stay unchanged and factor price equalization (FPE). Indicate how production would change, keeping in mind the predictions of the Rybczynski Theorem.

c.- State the Rybczynski Theorem and provide a graphical demonstration of its validity.

d.- What does this theory (and in this case evidence that Feenstra’s textbook presents) suggest should happen to output in Miami’s labor-intensive and less labor-intensive industries.

e.- How realistic is the assumption of FPE in this particular case.

Answer 1

one of the chief concerns of immigration policy maker is the extent to which immigration depress the labour market opportunities of less skilled net is not despite the presumption that and influx of immigrants will substantially reduce native wages, existing empirical studies suggest that affect is small dot see this server by greenwood and make doval 1986 and studies by gross man 1982, borjas1987 and lalan de explain and TOEFL . there are two leading explanations for this finding that first, immigrants have an average only slightly lower case than the native population dot thus, econometrics studies based on the distribution of the existing stock of immigrants probably under state the effect of unskilled immigration on less skilled

second, the locational choices of immigrants and natives for Shivali depend on expected labour market opportunities immigrants land to move two cities where the growth in demand for label can accommodate their supply even if new immigrants cluster in only a few cities