Reference no: EM131004510
Two countries, Canada and Japan, produce two goods, Phones (P ) and Phone Apps (A), using two factors, Skilled labor (S) and Unskilled labor (U). Phones are Skilled-labor intensive and Apps are Unskilled-labor intensive. Factors of production are perfectly mobile within countries. You do not know how many Skilled and Unskilled workers are in each country, but know that the relative price of Apps is lower in Canada than in Japan in autarky equilibrium.
(c) Migration
Suppose that some Unskilled Japanese workers take up an offer of a work permit from Cit- izenship and Immigration Canada (CIC) and move to Canada. Assume that countries keep trading goods and that the migration has no effect on the price of Phones or Apps.
(i) Show how the PPF changes in each country after the migration.
(ii) What happens to the production of Phones and Apps in each country?
(iii) What happens to the relative wage of Skilled workers in each country?
(iv) What happens to the real wage of Skilled and Unskilled workers in each of the countries?
(v) Does any group of workers in either country have a reason to oppose the migration of Unskilled workers form Japan to Canada in this example? Can you think of scenarios where your answer would be different?
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