(Solution) An economy consists of two regions, the North and the South. The short-run elasticity of labor demand in each region is -0. > Snapessays.com


(Solution) An economy consists of two regions, the North and the South. The short-run elasticity of labor demand in each region is -0.


For question,  b) and c) only, need help as soon as possible  thanks!!!An economy consists of two regions, the North and the South. The short-run elasticityof labor demand in each region is -0.5. Labor supply is perfectly inelastic within both regions.The labor market is initially in an economywide equilibrium, with 600,000 people employed inthe North and 400,000 people in the South at wage of $15 per hour. Suddenly, 20,000 peopleimmigrate from abroad and initially settle in the South. They possessed the same skills as thenative residents and also supply their labor inelastically.(a) (10 pts) What will be the effect of this immigration on wages in each of the regions in theshort run (before any migration between the North and the South occurs)?(b) (10 pts) Suppose 1,000 native-born persons per year migrate from the South to the Northin response to every dollar differential in the hourly wage between the two regions. Whatwill be the ratio of wages in the two regions after the first-year native labor responds to theentry of the immigrants?(c) (20 pts) What will be the effect of this immigration on wages and employment in eachof region in the long-run (after native workers respond by moving across regions to takeadvantage of whatever wage differentials may exist)? What are the equilibrium levels ofemployment and wage in both regions? Assume labor demand does not change in eitherregion.

 


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This question was answered on: Sep 21, 2023

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