1 page/≈275 words
Mathematics & Economics
International Factor Movements (Essay Sample)
Question: List and interpret the three points (as described on page 157) of international labor movements. Three points should be noted about this redistribution of the world's labor force. 1. It leads to a convergence of real wage rates. Real wages rise in Home, fall in Foreign. 2. It increases the world's output as a whole. Foreign's output rises by the area under its marginal product curve from L1 to L2, while Home's falls by the corresponding area under its marginal product curve. We see from the figure that Foreign's gain is larger than Home's loss, by an amount equal to the colored area ABC in the figure. 3. Despite this gain, some people are hurt by the change. Those who would originally have worked in Home receive higher real wages, but those who would originally have worked in Foreign receive lower real wages. Landowners in Foreign benefit from the larger labor supply, but landowners in Home are made worse off. As in the case of the gains from international trade, then, international labor mobility, while allowing everyone to be made better off in principle, leaves some groups worse off in practice. source..
Running Head: International Factor Movements International Factor Movements Name Affiliation 28 March 2011 Contents TOC \o "1-3" \h \z \u It leads to a convergence of real wage rates.. PAGEREF _Toc289088483 \h 3It increases the world`s output as a whole. PAGEREF _Toc289088484 \h 3Despite this gain, some people are hurt by the change. PAGEREF _Toc289088485 \h 4 It leads to a convergence of real wage rates. Real wages rise in Home,fall in Foreign. The three points as stated in the explanation refer to the fact that in countries which participate in international movements, labor moves to foreign countries where there is higher income till the wage rate equalizes. This is because as the supply of labor increases in the foreign countries, the wage rates fall till the real wage rate after exchange r...
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