2. The minimum wage in the Portland, OR metro area is $14.75/hr., and the unemployment
rate is 4.2%. Assume that a low-skilled worker from a rural Oregon county that moves to
Portland will earn this wage.
a. According to the Harris-Todaro model (Ch. 6 in your textbook), what should be the wage
in rural Oregon?
b. According to the Harris-Todaro model, what will happen to the rural wage if the urban
wage and the number of employed people (E in the formula) remain the same, but the labor
force (L in the formula - the number of people in the labor market) increases. Explain why
this makes sense.
Unlock access to this and over
10,000 step-by-step explanations
Have an account? Log In