Chapter 25 – Immigration
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Chapter 25 – Immigration
McConnell Brue Flynn 21e
DISCUSSION QUESTIONS
1. Which of the following statements are true? Which are false? Explain why the false statements
are untrue. LO1
a. More immigrants arrive to the United States each year illegally than legally.
b. The majority of legal immigrants are men.
c. Over half the new legal immigrants to the United States each year are from Mexico.
d. Most legal immigrants to the United States gain their legal status through employment-based
preferences.
2. In what respect is the economic decision to move across international borders an investment
decision? Why do economic migrants move to some countries but not to others? Cite an example
of an explicit cost of moving; an implicit cost of moving. How do distance and age affect the
migration decision? How does the presence of a large number of previous movers to a country
affect the projected costs and benefits of subsequent movers? LO2
3. Suppose that the projected lifetime earnings gains from migration exceed the costs of moving.
Explain how the decision to move might be reversed when a person considers present value. LO2
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4. How might the output and income gains from immigration shown by the simple immigration
model be affected by (a) unemployment in the originating nation, (b) remittances by immigrants
to the home country, and (c) backflows of migrants to the home country? LO3
5. Suppose initially that immigrant labor and native-born labor are complementary resources.
Explain how a substantial immigration might change the demand for native-born workers,
altering their wages. (Review the relevant portion of Chapter 14 if necessary to help answer this
question.) Next, suppose that new immigrant labor and previous immigrant labor (not native–
born) are substitute resources. Explain how a substantial immigration of new workers might
affect the demand for previous immigrants, altering their wages. LO3
6. What is a “brain drain” as it relates to international migration? If emigrants are highly educated
and received greatly subsidized education in the home country, is there any justification for that
country to levy a “brain drain” tax on them? Do you see any problems with this idea? LO3
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7. In July 2007 The Wall Street Journal (WSJ) reported that a growing shortage of skilled labor in
Eastern European countries such as Slovakia was driving up wages in key industries and reducing
business income. The reason for the shortages was a large migration of skilled Eastern European
workers to Western European countries. Use the simple immigration model to demonstrate the
key elements of the WSJ story as just described. LO3
8. Why is each of these statements somewhat misleading? (a) “Illegal immigrants take only jobs
that no American wants.” (b) “Deporting 100,000 illegal immigrants would create 100,000 job
openings for Americans.” LO4
9. Why are so many state and local governments greatly concerned about the federal
government’s allegedly lax enforcement of the immigration laws and Congressional proposals to
grant legal status (amnesty) to the 11.3 million illegal immigrants in the United States? How
might an amnesty program affect the flow of future border crossings? LO5
10. If someone favors the free movement of labor within the United States, is it inconsistent for
that person to also favor restrictions on the international movement of labor? Why or why not?
LO5
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11. LAST WORD What was the single most important reason for the decline in illegal
immigration between 2007 and 2009? What other factors were at play? Going forward, why
might people think it more likely that illegal immigration will fall rather than rise?
REVIEW QUESTIONS
1. Each year, the number of legal immigrants to the United States is ___________ the number of
illegal immigrants. LO1
a. Less than.
b. Equal to.
c. Greater than.
d. Less than, but only in most years, not every year.
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2. The primary reason people immigrate to the United States is: LO2
a. To escape political or religious oppression back home.
b. To reunite with family members.
c. To improve earnings and living standards.
d. None of the above.
3. True or False. Because older adults have more human capital, they are more likely to migrate
to another country than younger adults. LO2
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4. Use the accompanying tables for Neon and Zeon to answer the questions that follow. Assume
that the wage rate shown equals hourly output and income, and that the accumulated output and
income are the sum of the marginal revenue products (MRPs) of each worker. LO3
a. Which country has the greater stock of capital and technological prowess? How can you tell?
b. Suppose the equilibrium wage rate is $19 in Neon and $7 in Zeon. What is the domestic output
(= domestic income) in the two countries?
c. Assuming zero migration costs and initial wage rates of $19 in Neon and $7 in Zeon, how
many workers will move to Neon? Why will not more than that number of workers move to
Neon?
d. After the move of workers, what will the equilibrium wage rate be in each country? What will
the domestic output be after the migration? What is the amount of the combined gain in domestic
output produced by the migration? Which country will gain output; which will lose output? How
will the income of native-born workers be affected in each country?
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Answer: a. Neon. Neon produces more per worker.
b. Output in Neon is 40 because the equilibrium wage rate is $19. Recall that equilibrium
is where MRP=MFC (or MRP=equilibrium wage rate). Using the same logic Zeon’s
output is 55.
c. In equilibrium, without migration, 2 workers are employed in Neon and 5 workers are
employed in Zeon. If three workers leave Zeon (those employed) the wage rate will rise
to $13. These three additional workers will cause the wage to fall to $13 in Neon. Thus,
only three workers will move since any more movement would give them a lower wage
than they can earn in their home country (Zeon).
d. The equilibrium wage rate will be $13 in both countries. Output in Neon will be 85 and
in Zeon 28. Total Output (sum of both countries) was 40+55=95 before migration. After
migration Total Output is 85+28=113. Thus, the gain in output is 113-95=18. Obviously
Neon gains and Zeon loses. Income per worker will fall in Neon and rise in Zeon.
5. Migration between North Korea and South Korea has been prohibited since the end of the
Korean War in 1953. South Korea is now much richer than North Korea and has a much higher
marginal product of labor and a much higher wage rate than North Korea. If workers could
migrate from North Korea to South Korea, we would expect: LO3
a. Output to fall in South Korea but rise in North Korea.
b. Output to rise in each country.
c. Total combined output in the two countries to fall.
d. Total combined output in the two countries to rise.
6. True or False. Research indicates that immigration causes large decreases in the average
American wage. LO3
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7. True or False. The MB = MC level of immigration is likely to be achieved if we simply let in
every person who wishes to immigrate to the United States. LO5
PROBLEMS
1. Mexico has daily (rather than hourly) minimum wage laws. In 2016, the daily minimum wage
in Mexico was about 73 pesos per day, and the exchange rate between Mexican pesos and U.S.
dollars was about 17 pesos per dollar. LO3
a. In 2016, what was the Mexican minimum daily wage in terms of dollars?
b. Given that Mexican employees typically work 8-hour days, about how much per hour is the
Mexican minimum wage in terms of dollars?
c. In 2016, the Federal minimum wage in the United States was $7.25 per hour. How many times
larger was the hourly U.S. federal minimum wage than the hourly Mexican minimum wage?
d. If unskilled workers have a tendency to migrate to where they can obtain the highest
compensation for their labor, which country is more likely to be receiving low-skilled
immigrants?
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Feedback:
Part a: To convert the 73 pesos per day to U.S. dollars, we need to multiply this value by
the dollar price of the peso (= $/peso). That is, how many U.S. dollars I need to give up to
get one peso. The exchange rate given above is the peso price of the dollar (= peso/$), or
how many pesos I must give up for one U.S. dollar. Since the exchange rate is peso/$ =
2. Differences in productivity are usually the major force behind differences in wages and unit
labor costs. Suppose that a single unskilled worker at a pottery factory in Mexico can produce 1
mug per hour. By comparison, suppose that a single unskilled worker at a pottery factory in the
United States can produce 14 mugs per hour because more and better machinery generates higher
labor productivity. The Mexican mugs and the American mugs are identical in quality and
durability and sell for the same price. LO3
a. If unskilled pottery workers are paid the local minimum wage in both countries, how much is
the labor cost per mug for mugs produced in Mexico? For mugs produced in the United States?
(Use the minimum wages from Problem 1 and make all calculations in dollars.)
b. With regard to mug production, how much higher are labor costs per hour in the United States?
c. With regard to mug production, how much higher are labor costs per unit in Mexico?
d. Do higher labor costs per hour always imply higher labor costs per unit?
e. If firms with lower labor costs per unit expand while those with higher labor costs per unit
contract, in which country will mug-making firms be increasing in size and hiring more
employees? If unskilled pottery workers relocate to where they can find jobs, to which country
will they be moving?
Answers: a. The labor cost per mug in Mexico is $0.625. The labor costs per mug in
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Feedback:
Part a: If unskilled pottery workers are paid the local minimum wage in both countries,
how much is the labor cost per mug for mugs produced in Mexico? For mugs produced in
the United States? (Use the minimum wages from Problem 1 and make all calculations in
Part b: Labor cost per hour are $6.625 higher in the U.S., which is the difference in
3. There is evidence that, other things equal, a 10 percent increase in the number of workers
having a particular skill level leads to about a 4 percent decline in wages for workers with that
skill level. In addition, this 10–to-4 ratio appears to hold true whether the increase in labor supply
is caused by domestic changes in labor supply or by an influx of foreign immigrants. LO3
a. Suppose 42,000 computer programmers work in Silicon Valley. If the number of computer
programmers in Silicon Valley increases by 1,260 because of a change in U.S. immigration laws,
by how many percentage points would you expect the wage of computer programmers to fall in
Silicon Valley?
b. Suppose that 8,000 full-time cooks work in restaurants in the Denver area. If Denver becomes
popular both with U.S. citizens and with foreigners such that 400 full-time cooks move to Denver
from other parts of the United States while 480 full-time cooks move to Denver from other
countries, by how much would you expect the wages of full-time cooks to fall in Denver?
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4. In 2012, an estimated 7.8 million Mexican-born immigrants were employed in the United
States. LO3
a. If 60 percent of the Mexican-born immigrants remitted money to family members in Mexico in
2012, and if they each sent $100 per month, how much money did they remit in total for the year?
b. If, instead, 100 percent of the Mexican-born immigrants remitted money to family members in
Mexico in 2012, and if they each sent $250 per month, how much money did they remit in total
for the year?
c. The actual amount remitted to Mexico in 2012 by Mexican-born immigrants living in the
United States was about $23 billion. If we assume that 75 percent of the Mexican-born
immigrants remitted money to Mexico that year and if we further assume that each of those
immigrants remitted an equal amount each month, how much per month did each of those
immigrants have to remit to total $23 billion for the year?