Problem
Suppose there are two countries. In the rich country, the representative consumer has Hr units of human capital, and total factor productivity is zr. In the poor country, the representative consumer has Hp units of human capital, and total factor productivity is zp. Assume that b and u are the same in both the countries, Hr > Hp, and zr > zp.
(a) How do the levels of per capita income, the growth rates of per capita income, and real wages compare between the rich and poor countries?
(b) If consumers could choose their country of residence, where would they want to live?
(c) If each country could determine immigration policy, what should they do to maximize the welfare of the current residents?
(d) What is the immigration policy that maximizes the welfare of the citizens of both countries?
(e) Explain your results. Do you think this is a good model for analyzing the effects of immigration? Why or why not?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.