RE: Card/Krueger Revisited

[Seth Giertz]

Title:

I believe the Rybczynski theorem (popular among international economists) suggests that an increase in one factor (e.g., low-skilled labor) will result in an increase the production of the good which uses that factor intensively while the production of the good intensive in the constant factor will decrease.  If the country (or area) of interest is small relative to the overall economy, factor prices remain unchanged.

Seth Giertz

-----Original Message-----
From: Bryan Caplan [mailto:[EMAIL PROTECTED]]
Sent: Sunday, October 01, 2000 12:03 AM
To: [EMAIL PROTECTED]; Gordon Dahl
Subject: Card/Krueger Revisited


Almost everyone has heard of the Card/Krueger minimum wage paper.  No
apparent effect, suggesting a perfectly inelastic (vertical) labor
demand curve.

But they had another equally perplexing paper on the Mariel boat lift.
Large influx of unskilled Cuban labor into southern Florida, but no
perceptible downward effect on wages.  (This summary is based on
hearsay, so please correct me if I misstate anything).  In other words,
this paper suggests a perfectly elastic (horizontal) labor demand curve.

Note further that both of these papers focus on the market for
low-skilled labor, albeit in different states.  So as puzzling as both
papers are separately, they are even more puzzling taken together: how
can labor demand be at once perfectly inelastic and perfectly elastic?

Anyone able to resolve this puzzle?  And has anyone else pointed this
out?
--
          Prof. Bryan Caplan               [EMAIL PROTECTED]

          http://www.gmu.edu/departments/economics/bcaplan

  "[W]hen we attempt to prove by direct argument, what is really
   self-evident, the reasoning will always be inconclusive; for it
   will either take for granted the thing to be proved, or something
   not more evident; and so, instead of giving strength to the
   conclusion, will rather tempt those to doubt of it, who never
   did so before." 
    -- Thomas Reid, _Essays on the Active Powers of the Human Mind_