3) Suppose that the demand for undocumented immigrants by U.S. employers is Ed =

Question

3) Suppose that the demand for undocumented immigrants by U.S. employers is Ed =100–w, and the supply of labor by undocumented immigrants is Es =3w, where E is measured in thousands.

a) In the absence of any enforcement efforts (border or otherwise), how many immigrants enter the United States? What is the equilibrium wage?

b) Now suppose that the government devotes resources to patrolling the border. Suppose that these efforts lead to the capture and repatriation of two-thirds of the Es immigrants who seek to cross into the United States illegally. (In the interest of simplicity assume that the supply of labor is still Es =3w.) What happens to the equilibrium wage and the level of employment?

Explanation / Answer

In the absence of any restrictions
Demand = Supply
100-w=3w
4w=100
w=25
S=3w=2(25)=75

Since 2/3 of the force is captured that means only Es-2Es/3= Es/3 of the force is left
Given Es = 3w
Es/3=3w
Es=9w
Since demand hasn't changed,
Demand=100-w
Equillibrium wage will be where demand=supplu
100-w=9w
10w=100
w=10

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