Q6. Please answer all the questions with steps, thank you !!!! niorImation 6. Th
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Q6. Please answer all the questions with steps, thank you !!!!
niorImation 6. There are 10 people in Country A and another 10 people in Country B who have different skill levels. The annual earnings in their home country and the hypothetical annual earnings in Singapore are given in Table 1 and 2. a. What is 90-10 earning gap in Country A? b. Suppose the moving cost is 81,000. How many workers in Country A will immigrate to Singa- pore? Is it positively-selected immigration or negatively-selected immigration? c. What is 90-10 earning gap in Country B? d. Suppose the moving cost is $1,000. How many workers in Country B will immigrate to Singa pore? Is it positively-selected immigration or negatively-selected immigration? e. Suppose the moving cost in Country A increased up to $11,000. How many workers in Country A will immigrate to Singapore? Is it positively-selected immigration or negatively-selected immigration?Explanation / Answer
90-10 Wage gap: A measure of the range of income distribution, gives the percent wage differential between the worker at the 90th percentile and the worker at the 10th percentile of the income distribution.90-10 wage gap provides a measure of the range of the income distribution
a) For country A, 90th percentile and 10th percentile workers’ wages are $90,000 and $10,000. Hence the ratio is 90,000/10,000 is 9.
b)The moving cost is $1000. For country A, earnings in A are lower than corresponding hypothetical earnings in Singapore for low skill level workers (skills lower than 5). For a worker to move to Singapore, the increase in their wage from A to Singapore should be greater than that of moving cost. So it is expected that workers with skill level less than 4 would move to Singapore. Hence 4 workers would move from A to Singapore. As lower skilled workers are moving it is negative selected immigration to Singapore
c)For country B, 90th percentile and10th percentile workers’ wages are $56,000 and $40,000. Hence the ratio is 56,000/40,000 is 1.4.
d)The moving cost is $1000. In contrary to what we observed in country A, earnings in B are lower than corresponding hypothetical earnings in Singapore for high skill level workers (skills greater than 5). For a worker to move to Singapore, the increase in their wage from A to Singapore should be greater than that of moving cost. So it is expected that workers with skill level greater than or equal to 5 would move to Singapore. Hence 6 workers would move from B to Singapore. As higher skilled workers are moving it is positive selected immigration to Singapore.
e)For a worker to move to Singapore, the increase in their wage from A to Singapore should be greater than that of moving cost. Hence only those workers whose increase in wage from A to Singapore is greater than $11,000. As per the table, only workers with skill levels of 1 and 2 have incremental wage greater than $11,000.As the skill levels are low, it is negative selected immigration to Singapore.
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