Suppose that worker skills can be measured in efficiency units, and that efficiency units are distributed in the population such that worker 1 has 1 efficiency unit, worker 2 has 2 efficiency units, etc. There are 100 workers in the population of Adanac. Adancians decide whether to migrate to the neighboring country of S'estats Dentinu based on a comparison of their weekly earnings at home (wA) and their potential earnings in S'estats Dentinu (wSD). The wage-skills relationship is given by:
wA=670+s and wSD=700+s,
where s is the number of efficiency units of the worker.
A. Assume no migration costs. What is the average number of efficiency units among immigrants (from Adanac to S'estats Dentinu)? Is the immigrant flow positively or negatively selected?
B. Suppose that it costs $50 to migrate from Adanac to S'estats Dentinu. What is the average number of efficiency units among immigrants to S'estats Dentinu, and is the immigrant flow positively or negatively selected?
C. How would the selection process change if the migration costs, rather than being constant throughout the population, were much lower for more skilled workers?