Suppose Hinterland has been a closed economy (meaning there is no immigration from foreign countries and no

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Suppose Hinterland has been a closed economy (meaning there is no immigration from foreign countries and no international trade). The current labor force has 4 million skilled workers and 8 million unskilled workers. Both types of labor have perfectly inelastic supply curves, and the current skilled-unskilled wage ratio is 2.5. The elasticity of demand of skilled labor is -0.4, while the elasticity of demand of unskilled labor is -0.1. Suppose Hinterland allows a brief period of immigration, during which time 50,000 skilled workers and 200,000 unskilled workers migrate to Hinterland. Suppose there are no other changes to the economy. Approximately what is the new skilled-unskilled wage ratio?
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Labor Economics

ISBN: 978-0073523200

6th edition

Authors: George J. Borjas

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