What is the market-clearing wagewith open borders

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Reference no: EM13243687

Labor demand for low skilled workers inthe U.S. is w=40-.15L where L is the number of workers (inmillions) and w is the hourly wage. There are 180 million domesticU.S. low-skilled workers who supply labor inelastically. If theU.S. opened its borders to immigration, 20 million low-skilledimmigrants would enter to supply labor. (Graph all parts)

a. What is the market-clearingwage if immigration is not allowed?

b. What is the market-clearing wagewith open borders?

c. Compare the loss of wages todomestic workers to the gain of wages for immigrants.

d. How much would opening bordersbenefit the entire U.S. by? Why is this figure greater than thegain to immigrants? Explain graphically.

e. The gain to the U.S. economymay not be ideal because of an issue of inequality that exists inthis situation. Explain this phenomenon.

Reference no: EM13243687

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