The cost of providing the public service will be Γ(H, l)c
B
(w, r) where c
B
(w, r) is the
minimised unit cost in sector B. In this setting, immigration will typically lead to
substitution between capital and labour in the traded sector, reducing w and raising r,
and this will affect the unit cost of public provision according to whether the public
sector is more or less labour intensive than the private sector.