The size of the substitution effect when companies substitute foreign labor for domestic labor,will be greater (on domestic labor)when

Question

Quizplus · Accepted Answer

The size of the substitution effect will be greater when the supply of domestic labor is more elastic because firms can more easily replace domestic workers with foreign labor. Additionally, if the goods produced are easily transported between nations, it facilitates the substitution of foreign labor for domestic labor by reducing logistical costs. Finally, if the ability to produce the goods is shared by all nations, it means that foreign labor can effectively substitute for domestic labor in producing those goods, increasing the substitution effect.

The Size of the Substitution Effect When Companies Substitute Foreign