Reference no: EM132180511

Question: Suppose that the United States were a closed economy (meaning there is no immigration from foreign countries and no international trade). The current labor force has 50 million skilled workers and 50 million unskilled workers-and both types of labor have perfectly inelastic supply curves. In the next year, there is a net increase in the U.S. labor force because of the growth of the native population. In addition, the country opens its borders to international trade and immigration. At the same time, however, there is no change in demand for final goods or in production technology. Calculate the impact of each of the following developments on the relative wage of skilled and unskilled workers:

a. Of the new domestic entrants in the U.S. labor force, 360,000 are skilled and 220,000 are unskilled. At the same time, 60,000 skilled workers and 1 20,000 unskilled workers retire.

b. One million immigrants enter the country, of which 800,000 are unskilled and 200,000 are skilled.

c. U.S. exports require the services of I million skilled workers and 500,000 unskilled workers . At the same time, U.S. imports "embody" the services of 800,000 skilled workers and 1 ,500,000 unskilled workers (in the sense that this combination of workers would have been required to produce these imports in the United States). What would happen if the labor demand elasticities equal -0.1 for each type of labor? What if they equal - 1?