In the two-country model of international labor mobility
A) the effect of migration is to cause real wages in the two countries to diverge.
B) the long-run equilibrium global real wage is equal to the greater of the pre-migration wages in the two countries.
C) labor has only limited international mobility.
D) the long-run equilibrium global real wage is equal to the lesser of the pre-migration wages in the two countries.
E) the effect of migration is to cause real wages in the two countries to converge.

Question

Quizplus · Accepted Answer

In the two-country model of international labor mobility, the effect of migration is to cause real wages in the two countries to converge towards a common level. This is because when workers migrate from a country with a relatively lower wage to a country with a higher wage, there is an increase in the supply of labor in the higher-wage country, which reduces the wage rate in that country. Similarly, when workers migrate from a country with a higher wage to a country with a relatively lower wage, there is a decrease in the supply of labor in the higher-wage country, which increases the wage rate in that country. As a result, over time, the real wages in the two countries tend to converge towards a common level.

In the Two-Country Model of International Labor Mobility