B. Exercise
Consider a situation in which there are just two countries: an Origin, and a Destination country.
Labor demand in the origin country is given by: wo=10-Lo
Labor demand in the destination country is given by: wd=14-Ld where Lo and Ld indicate the number of workers in the origin and destination countries, respectively.
2 Initially, there are 6 workers in the origin country and 4 workers in the destination country. Assume that labor supply is perfectly inelastic in both countries (that is, that labor supply can be represented through a vertical line).
Consider first the case in which individuals are not able to change their country of residence. What would be the equilibrium wage in the destination and in the origin countries?
Consider next the case in which workers can freely migrate across countries (at no cost). What would be the equilibrium wage in the destination and in the origin countries? How many workers (if any) would migrate from the origin to the destination country?
The government in the destination country is worried about the potentially negative effects of immigration on the labor market. To address this issue, the government is considering the introduction of a
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