If movement of labor across countries is costless and painless, it can be expected that:
A)all the countries in the world will operate at the full employment level.
B)the wage rates in the countries will equalize over time.
C)the rate of unemployment will fall to zero in all the countries.
D)the GDP of the countries will equalize over time.

Question

Quizplus · Accepted Answer

When movement of labor across countries is costless and painless, it will lead to an equalization of wage rates over time. This is because workers will move to the countries with higher wage rates which will increase the supply of labor and lower the wages in those countries, while the demand for labor and wages will increase in the countries with lower wage rates. This will continue until the wage rates equalize across all countries. However, it does not necessarily mean that all countries will operate at full employment, unemployment will fall to zero, or GDP will equalize.

If Movement of Labor Across Countries Is Costless and Painless