According to the neoclassical theory of distribution, the real wage earned by any worker equals that worker's marginal productivity. Let's use this insight to examine two groups of workers: urban workers and farmers.

Assumptions:

1) Labor CAN'T move freely between being farmers and being urban workers.

2) Capital CAN move freely between the two sectors

Question:

Suppose a wave of immigration that increases the labor force ONLY in the urban sector. Use the neoclassical theory of distribution to predict the impact on the real wage and the real rental price of capital in both sectors. Who benefits from immigration, urban workers or farmers? Graphically illustrate and explain your answer.