Question

If immigration occurs and workers move from the source country to the destination country, which of the following statements describe the effect of the immigration on the destination country in the long run? Select one or more: a. In the destination country, an increase in the price of the labor-intensive good and a decrease in the price of capital-intensive good. b. In the receiving country, no change in the price of either the labor-intensive or capital-intensive good. c. In the destination country, nonlabor resource owners will gain. d. In the destination country, the prices of both labor-intensive and capital-intensive goods increase. e. In the destination country, the capital-labor ratio in each industry is unchanged, and the additional labor in the economy is fully employed. f. In the destination country, capital will move to the higher productivity use in the labor-intensive industry until returns are equalized.

Answer 1

Ans.

If immigration occurs and workers move from source country to destination country , then statements A and F describe the effect of immigration on the destination country in the long run.

According to H - O model , in long run, immigration will increase the price of labor-intensive goods and decrease in the price for capital -intensive goods. That is there will be increase in production of labor-intensive goods. Moreover effect of immigration in long run will be increase in output and no change in factor prices.However in long run , when there is immigration of labor and if all domestic factor of production are mobile and relative prices of goods remain constant then only capital labor ratio in each industry is unchanged , where additional labor is fully employed. As well as in the destination country capital will move to labor-intensive industry unless returns from both the factors are equalized.