Use the following notation:La = labour in agricultureLi = labour in industryLu = labour in urban underemployedLtot = total labour in the economywa = wage rate in agriculturewi = wage rate in industryMPLa = value of marginal product of labour in agricultureMPLi = value of marginal product of labour in industrym = subsistence wage?i = fixed minimum wage in industryPi = Pa = 1. (price of industrial output, price of agricultural output)

Question 3. Now assume that the situation as depicted in the Harris Todero model and workers move from rural to urban areas until the expected return from living in the city equals the agricultural wage wa. Assume: VMPLi = 110-2Li; VMPa = 60 - 025 La; There a minimum wage that must be paid to industrial workers of wi = 50. The urban under-employed receive wu=30. There is a lottery for urban jobs, the probability of getting an urban job is Li / (Li + Lu), while the probability of getting an urban underemployed job is 1 - Li / (Li+Lu). Ltot= 100 = Li + La + Lu. Following the notes from class, we see that in equilibrium, we get Li*=30, Lu*=10, La*=60, wa*=45. Now assume that an investment in rural road infrastructure occurs that shifts MPLa to MPLa = 65 - 0.25 La, while everything else stays the same. How many workers will be employed in industry, how many workers will be urban under-employed? How many workers will be in agriculture? What will be the agricultural wage