Using the numerical example in problem 5, assume now that Foreign limits immigration so that only 2 workers can move there from Home. Calculate how the movement of these two workers affects the income of five different groups:
a. Workers who were originally in Foreign
b. Foreign landowners
c. Workers who stay in Home
d. Home landowners
e. The workers who do move
Problem 5
In Home and Foreign there are two factors each of production, land, and labor used to produce only one good. The land supply in each country and the technology of production are exactly the same. The marginal product of labor in each country depends on employment as follows:
Initially, there are 11 workers employed in Home, but only 3 workers in Foreign.
Find the effect of free movement of labor from Home to Foreign on employment, production, real wages, and the income of landowners in each country.