A basic model of immigration One of the main models used to examine the economic effect of immigration focuses on immigrants as workers. In this model, wage differences across countries motivate people to move. Immigrants move from countries with lower wages to countries with higher wages. As immigrants move, wage differences shrink and perhaps ultimately disappear.' Figure 1.1 shows the labor markets for two countries. The country with higher wages before immigration is the destination country, and the country with lower wages is the origin country. In each country, there is a demand for labor that is based on the value of workers' output, as reflected by the downward sloping labor demand curves, Each country also has a supply of labor. The supply of labor is assumed to not depend on the wage, or to be perfectly inelastic (a vertical line). This assumption is made for simplicity, but the general results of the model carry through if the labor supply curves are upward sloping, Before immigration occurs, natives of each country supply all of the labor in that country. The pre-immigration labor market equilibrium in the destination is Ly workers and wage W. in Figure 1.1(a), and Lo workers and wage Wo in the origin in Figure 1. 1(b). Suppose that some workers migrate from the origin to the destination, and workers are perfect substitutes across the two countries. Perfect substitutability means that a native-born worker in the destination is interchangeable with an immigrant worker from the origin, As this migration occurs, the labor market equilibrium in each country changes, The new equi- librium in the destination is Loew workers at wage Wo+M, and Lo-M workers at wage Wow in the origin. Immigration thus results in the number of workers in the destination increasing (a) Destination country (b) Origin country Wage LS Wage 18' IS B WD+M WOM G C E Wo LD H LO LDIM Labor LOM Lo Labor Figure 1.I The labor market in the destination and origin countries before and after immigration. Before immigration, I, workers are employed at wage W. in the destination. In the origin, Lo workers are CS employed at wags Wo. After immigration, Joy workers are employed at wage Wot in the destination, and Scanned WithpalaCalled