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1. Suppose that a worker's skills can be measured in terms of standardized units of human capital, and that the distribution of skill units in
1. Suppose that a worker's skills can be measured in terms of standardized units of human capital, and that the distribution of skill units in the population is such that worker 1 has 1 unit of skill, worker 2 has 2 units, and so on. There are 100 workers in the population of Neolandia. In deciding whether to migrate to the United States, Neolandians compare their weekly earnings at home (W0) with their potential earnings in the United States (wus). The wage-skills relationship in each of the two countries is given by: wo = 700 + 0.5s Wus = 670 + S where 5 gives the number of units of skill that the worker has. a. Assume that there are no migration costs. What is the average number of skill units among immigrants? Is the immigrant ow positively or negatively selected? Use a graph to illustrate your answer. b. Suppose that it costs $10 to migrate from Neolandia to the United States. What is the average number of skill units among immigrants? Is the immigrant ow positively or negatively selected? 0. What would happen to the selection that takes place if migration costs are not constant in the population, but increase with the level of skill? Illustrate your answer graphically (a numerical answer is not necessary here)
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