I'm learning about the specific factor model and as part of that, I'm studying the impact of immigration on wages and labour.
I was doing an exercise online, with two goods cloth and food, cloth being more labour intensive than food, the question is about the impact of immigration on labour/wages and the answer states that:
- Immigration = more labour
- More labour means lower capital-labour ratio, lower land-labour ratio
- Lower capital-labour ratio/land-labour ratio lead to higher marginal productivity for capital and land
I dont understand 3., I was under the impression that generally less labour implies higher productivity, as every worker now has more land/capital to work with. Can anyone explain 3. ?
thank you for your help.