Exam (elaborations)
ECON0041 Migration and Job Search Problem Set 3 UCL
- Course
- Institution
A copy of the 2022/23 problem set 3 (with solutions) for ECON0041 Economics of Migration and Job Search. Final mark: 85%
[Show more]
1 review
By: AdamLee12 • 8 months ago
Seller
Follow
joelchoo
Reviews received
Content preview
Economics of Migration and Job Search: Problem Set 3Suphanit Piyapromdee
1. Suppose workers prefer low s locations but firms prefer high s locations, what would
the Roback model predict in terms of relative wages and rents between city 1 and
2 where s1 < s2 ? Use a diagram, explain the intuition and give an example of such
amenities.
Solution: In this case, we have the firm’s cost curve in city 2 lies above that of city
1. Since city 2 has higher s, for firms to be indifferent between city 1 and 2, it must
be that factor prices are also higher in city 2. For workers, as they prefer city 1 given
the same factor prices, the indifference curve of city 2 has to lie below city 1’s. In
equilibrium, wage in city 2 has to be higher than wage in city 1, while relative rents
are ambiguous. This is because workers prefer city 1, but firms prefer city 2. w
and r have to be such that the indifferent conditions hold for both firms and workers.
Because a higher wage attracts workers and discourages businesses, wage in city 2
is unambiguously higher. On the other hand, high rents discourage both firms and
workers to locate in the area. So r may be higher or lower in city 2. Industrial waste
disposal facility can be an example. Such facilities can reduce firms’ cost but those
may be undesirable for residents.
Case 1 Case 2
r r
V(w,r,s1) = V0 V(w,r,s1) = V0
V(w,r,s2) = V0 V(w,r,s2) = V0
r2 C(w,r,s2) = 1 r1
r1
r2
C(w,r,s1) = 1
C(w,r,s2) = 1
C(w,r,s1) = 1
w1 w2 w1 w2
w w
2. Now allow each individual to have idiosyncratic preference shocks. The utility of
1
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller joelchoo. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $3.87. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
67096 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now