Assume an economy in which the level of tehnology and the st

Assume an economy in which the level of tehnology and the stock of capital are fixed. If there is a sudden increase in the labor force due to immigration, how would the standard of living be affected? Would a difference if the increase in the labor force were instead cased by a higher labor force participation rate of women?

Solution

If there is an economy in which Technology, the stock of capital are fixed & there is an increase in the labor force maybe due to arrival of foreigners or maybe due to the immigration. Then, automatically living standards & per capita will decrease since the population has increased in an economy or region.

But, if the influx of population or in the labor force is only due to the increase of labor force participation of women then income per capita would increase, since the overall population would not increase. In this case, we would see an increase in living standards.