What will happen to the relative wage?.
Assume that in country ABC there are two factors of production: Skilled labor and unskilled labor Show more Assume that in country ABC there are two factors of production: Skilled labor and unskilled labor. Also assume that these factors of production are used to produce only two goods: Computers and Home Furniture. Computers are intensive in using skilled labor and home furniture are intensive in using unskilled labor. Make the assumption of diminishing marginal productivity for both factors of production. Using a Heckscher-Ohlin model (and the assumptions that come with the model) explain very carefully in writing and using graphs (all necessary graphs including the Edgeworth box) what will happen to the relative production of these two goods if relative price of goods remains constant and the supply of skilled labor increases due to immigration. What will happen to the relative wage? Show less
What will happen to the relative wage?
