Econ 433: Advanced International Trade

Econ 433: Advanced International Trade

Question

Econ 433: Advanced

International Trade

Homework 3

Due in class, October 15, 2015

Full credit requires

full explanations!> https://solutionlly.com/downloads/econ-433-advanced-international-
trade
Econ 433: Advanced International Trade

Question

Econ 433: Advanced

International Trade

Homework 3

Due in class, October 15, 2015

Full credit requires

full explanations!

Problem 1 (Immigration-Short Run): Home produces

fish using unskilled labor (U) and capital (K) and computers using skilled (S)
and (U). Unskilled labor is mobile
between industries. Capital and skilled
labor are specific to their industries.
Goods prices are fixed on world markets.

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1a. Suppose
that Home experiences an inflow of unskilled
workers. How does this inflow affect
the real wage paid to skilled and unskilled labor?

1b. Now
suppose instead that Home experiences an inflow of skilled workers. How does this inflow
affect the real wage paid to
skilled and unskilled labor?

Problem 2 (Immigration-Short Run): Use the global

beaker diagram (see figure 5-14 in the book) to analyze the following
problem. Home and Foreign initially have
the same wage when political conflicts occur within Home. A substantial number of workers (the
mobile
factor) flee home and enter the foreign work force instead.

2a. How does the exodus of workers affect the

earnings of workers in Foreign?

2b. How does the exodus of workers affect the

earnings of specific factor owners in Foreign?

Problem 3 (Immigration-
long run): Home (H) produces autos and shirts using skilled (S) and unskilled
(U) labor. Autos are skill intensive
relative to shirts. Home is trading at fixed world prices. Now suppose that a substantial portion
of the
country’s unskilled workers leave home for foreign.

3a. How
does an outflow of unskilled labor into H affect output of each good? Explain
using the Box diagram. Also, comment on
how the outflow of unskilled labor affects factor prices in H.

Econ 433: Advanced International Trade

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