The Rybczynski Theorem states that an increase in the amount of a factor found i

Question

The Rybczynski Theorem states that an increase in the amount of a factor found in an economy will increase the output of the industry using that factor intensively and decrease the output of the other industry.

a. If the Rybczynski Theorem holds true, would you expect that the ratio delta(computer)/delta(shoe) will increase or decrease in response to immigration? Will this augment or diminish the effect of a disproportionate increase in immigration of low-skilled workers from Mexico to the U.S.?

Explanation / Answer

Let’s consider computer job is high-skilled and shoe job is low-skilled.

The ratio would increase if the immigration is high-skilled workers, since more computer jobs could be done by them.

The ratio would decrease if the immigration is low-skilled workers, since more shoe jobs could be done by them.

This will augment because the low-skilled workers should produce more shoes, causing less number of computers.

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