When Poland entered the European Union -where there is free movement of labor across member countries -some of the abundant Polish plumbers migrated to the United Kingdom to fill the shortage there. The net result was that wages for plumbers in the U.K. stabilized or softened and wage rates for plumbers in Poland increased. As the U.K. consumer of plumbing services benefited from this development, one could argue that the real income of the British consumer was, therefore, enhanced. This is an example of the _____.

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This is an example of the factor-price equalization theory, which suggests that in the long run, increased trade and mobility of factors of production (like labor) across countries will lead to equalization of factor prices (like wages) across those countries. The migration of Polish plumbers to the UK has led to an increase in wages for plumbers in Poland and stabilization of wages in the UK, which is in line with the predictions of the factor-price equalization theory.

When Poland Entered the European Union -Where There Is Free