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(2) Now suppose the production technology is given by Y(H, L) : AL1_O'HO', with 0 (2) Now suppose the production technology is given by Y(H,

(2) Now suppose the production technology is given by Y(H, L) : AL1_O'HO', with 0

(2) Now suppose the production technology is given by Y(H, L) ALI with 0 < a < 1. Derive an expression for the skill premium as a function of the relative supply of skills. Explain (i) what happens to the skill premium as H/ L increases and (ii) how the effect depends on a. 13 points]

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