Consider the model of trade between the United States and China presented in Chapter 6. Suppose that we alter that model by assuming that 6 million unskilled workers move from China to the United States.
(a) How will the supply of plastics and apparel change in China as a result of the immigration? (Provide exact numbers.)
(b) How will the supply of the two goods change in the United States?
(c) Compute the new world relative supply of plastics.
(d) What will the new equilibrium relative price of plastics be?
(e) How will the budget sets for skilled and unskilled workers in both countries change as a result of the immigration? In particular, are unskilled workers in the United States harmed by the immigration of these unskilled workers?
(f) Economist Robert Mundell has argued that (in a Heckscher-Ohlin world) trade and international factor movements are substitutes-that they have the same economic effects. Does this example illustrate that point or refute it?