Model of international migration

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Reference no: EM13770280

Consider the following model of international migration. The potential migrants originate in country 0, the source country. Suppose the distribution of skills in the source country uniform over the closed interval [1, 100]. That is, worker 1 has 1 efficiency unit of skill, worker 2 has 2 efficiency units of skill, worker 3 has 3 efficiency units of skill and so on. There are 100 workers in the population. In deciding whether to migrate to the United States, these workers compare their earnings in the source country (w0) with their potential earnings in the United States (w1).

Suppose it costs $10 to migrate to the United States. The wage-skills relationship in each of the two countries is given by: w0 = 350 + 0.75s , w1 = 300 + 1.50s Where s is the number of efficiency units of skill the worker possesses

a ) Draw a graph showing the equations for the weekly earnings in the source country (w0) and the potential earnings in the United States (w1). In that graph, identify the intercepts and slopes, the threshold skill level (S*), which individuals will choose to move from the source country to the United States, and which individuals will choose to stay in the source country? Is the immigrant flow positively or negatively selected?, Why?

Reference no: EM13770280

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