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Flashcards in FOP Movements Deck (67)
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1

The US distribution of skills among foreign born workers and what type of immigrants are they?

BINOMIAL
- no education - illegal
- very educated - brain drain

2

Distribution of skills among US born workers

Normal distribution
- majority middle educated

3

Remittances are higher for what type of immigrants? Why?

Illegal - due to higher demand for remittances by family members back home, despite lower skills.

4

In the labour mobility model, how many goods do we assume?

One good = output

5

In the labour mobility model, how many FOPs? What do we assume about mobility?

2 FOPs:
Land = immobile
Labour = mobile

6

Explain decreasing MPL concept

On a fixed area of land, each worker becomes less productive as more workers are added to that fixed area of land.

7

What shape is the production function when we change labour but keep land constant?

Concave
MPL > 0
Change in MPL < 0

8

Area under MPL =

Area under MPL = total value of output

9

Total value of output =
And why?

Total value of output = value of wages + value of rents
Due to perfect competition: zero profits
Wages = rectangle below real wage, area above is rents.

10

Perfect competition FOC for inputs

W/P = MPL

11

What does the perfect competition FOC about inputs assume about workers?

Assumes workers are homogeneous

12

How do Home and foreign differ in immigration model? How are they the same?

Same technology
Different land-labour ratio endowments

13

If home is labour abundant, how does this impact MPL and wage?

Labour abundant = lower MPL due to diminishing MPL = lower wage by perfect competition FOC

14

Incentive to migrate driven by...

Wage differentials across countries due to different MPLs due to different land-labour ratios.

15

When is there no longer an incentive to migrate?

When MPL=MPL*
W=w*

16

If workers migrate from home to foreign, how does this impact home and foreign?

Home: L falls, MPL rises, w rises
Foreign: L rises, MPL falls, w falls

17

Empirical example of migration leading to wage convergence

1st wave globalisation: 1870-1913
Initially, wages higher in destination that origin countries.
Wages rose more in origin countries than destination as expected.

18

In the global equilibrium, how do MPL and w of home and foreign compare?

MPL=MPL*
w=w*
Movement of labour created arbitrage.

19

Winners of migration from home to foreign

- Remaining home workers
- Migrating workers
- landowners in foreign

20

Losers of migration from home to foreign

- Existing foreign workers
- Landowners in Home

21

Does migration create net gains overall? How? Why?

Migration —> increase in world output
Because workers move to where they’re most productive = able to produce more world output with same world labour force.

22

When is world output maximised?

When MPL=MPL*

23

What model is an alternative to the MPL model of migration? Why?

HO model of trade with 2 goods due to embodiment

24

3 reasons why we do not see wage equalisation empirically.

1. Countries may not produce the same goods so MPLs not comparable
2. Countries may have different technology - MPL depends on tech as well as quantity of L
3. Barriers to immigration / some FOPs immobile

25

How could our model explain the rising wage gap in the US?

Immigration mostly of lowest educated —> less educated relatively more abundant —> rising wage gap

26

But what do we actually see in terms of US education trends, and hence what could be the cause of wage inequality Instead?

Overall in US LF, education risen.
So more educated more abundant.
Instead due to skills biased technological change - cannot blame immigration.

27

International lending and borrowing refers to the movement of what type of capital?

Financial capital - we do not refer to the movement of physical capital, but the money can be used to buy physical K.

28

We interpret international K mobility as what type of trade?

Inter-temporal Trade

29

What are the 2 goods in our model of international borrowing and lending?

Consumption today
Consumption tomorrow
Assume 2 times periods 2 distinct goods

30

How do we represent the trade off between consumption today and tomorrow?

Inter temporal PPF
Slope = opportunity cost of consumption today in terms of consumption tomorrow