International Labor Mobility Figure 7-2: The Marginal Product of Labor Marginal Product of labor. MPL Rents Rea wage Wages MPL abor. L Copyright C 2003 Pearson Education, Inc Slide 7-6
Copyright © 2003 Pearson Education, Inc. Slide 7-6 Rents Wages Real wage MPL Labor, L Marginal Product of labor, MPL International Labor Mobility Figure 7-2: The Marginal Product of Labor
International Labor Mobility International Labor Movement Suppose that workers are able to move between the two countries Home workers would like to move to Foreign until the marginal product of labor is the same in the two countries This movement will reduce the home labor force and thus raise the real wage in home This movement will increase the Foreign labor force and reduce the real wage in Foreign Copyright C 2003 Pearson Education, Inc Slide 7-7
Copyright © 2003 Pearson Education, Inc. Slide 7-7 ▪ International Labor Movement • Suppose that workers are able to move between the two countries. – Home workers would like to move to Foreign until the marginal product of labor is the same in the two countries. – This movement will reduce the Home labor force and thus raise the real wage in Home. – This movement will increase the Foreign labor force and reduce the real wage in Foreign. International Labor Mobility
International Labor Mobility Figure 7-3: Causes and Effects of International Labor Mobility MPL Marginal product MPL of labor Bc MPL MPL o Home employment 42 Foreign O employment Migration of labor from Home to Foreign Total world labor force Copyright C 2003 Pearson Education, Inc Slide 7-8
Copyright © 2003 Pearson Education, Inc. Slide 7-8 L2 International Labor Mobility Figure 7-3: Causes and Effects of International Labor Mobility MPL MPL MPL* MPL* Home employment O Foreign employment O* A B C L1 Migration of labor from Home to Foreign Total world labor force Marginal product of labor
International Labor Mobility The redistribution of the world 's labor force Leads to a convergence of real wage rates Increases the world s output as a whole eaves some groups worse off Extending the analysis Modifying the model by adding some complications Suppose the countries produce two goods, one labor intensive and one land-intensive Trade offers an alternative to factor mobility: Home can export labor and import land by exporting the labor-intensive good and importing the land-intensive good Copyright C 2003 Pearson Education, Inc Slide 7-9
Copyright © 2003 Pearson Education, Inc. Slide 7-9 ▪ The redistribution of the world’s labor force: • Leads to a convergence of real wage rates • Increases the world’s output as a whole • Leaves some groups worse off ▪ Extending the Analysis • Modifying the model by adding some complications: – Suppose the countries produce two goods, one laborintensive and one land-intensive. – Trade offers an alternative to factor mobility: Home can export labor and import land by exporting the labor-intensive good and importing the land-intensive good. International Labor Mobility