8. Labour Market A Labour Market B (1 A) (2 A) (3 A) (1 B) (2 B) (3 B) L VMP A , Annual wage VTP A , Value of total product L VMP B Annual wage VTP B , Value of total product 1 $25000 $25000 1 $21000 $21000 2 23000 48000 2 19000 40000 3 21000 69000 3 17000 57000 4 19000 88000 4 15000 72000 5 17000 105000 5 13000 85000 6 15000 120000 6 11000 96000 7 13000 133000 7 9000 105000 8 11000 144000 8 7000 112000 9 9000 153000 9 5000 117000 10 7000 160000 10 3000 120000
9.
10. Efficiency gains from migration COUNTRY A COUNTRY B L L W a W e e f b W 0 D A a g c W e W b 0 W h i j l k m D B Before migration: output A=Oabe; After migration: output A= Oacf Before migration: output B=Ohjl After migration: output B=Ohik
11.
12. COUNTRY A (destination) (before migration) L W a W e e f b W 0 D A a g c Before migration: Total output? Labour Share? Capitalists share? After migration: Total output? Labour Share? Capitalists share? W a W a W e 0 D A b g c e f L COUNTRY A (destination) (after migration) g
13. Capital Flows COUNTRY A (USA) COUNTRY B (South Korea) L L S S D D 1 D D 1 W W 0 0 W A W E W E W B Initially: W A > W B Capital flows shift the labour demand curve The wage gap/differential between A and B is reduced. This reduces the extent of migration.