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53 Cards in this Set
- Front
- Back
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LF =
LFPR = EPR = UR = |
LF = E+U
LFPR = LF/WP EPR = E/WP UR = U/LF |
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Measurement issues of unemployment etc
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Labour intensity not measured (4 day working weeks etc), hidden unemployed not counted, employment rates can change because of an increase in working age population, only have to work 1 hour per week to be considered employed
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slope of the indifference curve at the endowment point?
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reservation wage
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income effect generally leads to more or less leisure and work when non-labour income increases? (assuming leisure is a normal good)
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income effect = can work less to get the same amount of income so will increase leisure and decrease work hours
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sub effect?
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more expensive to buy leisure when w increases, so will buy less. Y effect - can work less for same wage so will increase leisure/ leisure is now relatively cheaper so buy more
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How do u show income effect on the graph?
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move the original budget line up to the new utility curve and it is where they intersect
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draw a graph of Y effect dominating sub effect and vice versa
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wk 1 sl 20 &21
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what is the intertemporal sub hypothesis?
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prediction that people allocate their time over the life cycle so as to take full advantage of changes in the price of leisure (buy leisure in recession coz its cheap)
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effect of a wage increase on retirement age. which effect dominates?
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substitution effect dominates bc workers generally retire later when wage increases. An increase in pension benefits will have both effects but both encourage the worker to reture earlier
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Added worker effect? Discouraged worker effect?
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AWE = "secondary" workers currently out of labour market join it bc the main breadwinner bcomes unemployed or faces a wage cut due to recession. LFPR of secondary workers has a counter-cyclical trend.
DWE = unemployed workers find it too hard to find jobs during recession so leave labour force. Pro-cyclical |
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isoquant like... slope=??
isocost like... slope=?? |
isoquant like indif curve, MRTS
isocost like budget constraint, slope = -w/r. prof max where MRTS=w/r=MPE/MPK |
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long run labour demand - if the wage rate drops, what two effects take place?
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scale effect: firm takes advantage of the lower price of labour by expanding production
Sub effect: firm takes advantage of wage change by rearranging its mix of inputs |
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scale effect? (on labour demand)
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scale effect: firm takes advantage of the lower price of labour by expanding production (like income effect)
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sub effect for labour demand?
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firm takes advantage of wage change by rearranging its mix of inputs
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why is demand curve -ve in the long run?
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due to scale n sub effects that occur in response to a change in wage rate. more elastic bc it can take full advantage of a wage change
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perfect complements have an elasticity of substitution of...
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0
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how do u measure the elasticity of substitution?
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(%change K/E) / (%change w/r)
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what does Marshall's rules of derived demand describe?
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the factors that r likely to generate elastic labour demand curves in a particular industry
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Marshalls rules of derived demand (4)? Labour demand is more elastic when....
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1. elasticity of substitution is greater (isoquant)
2. elasticity of demand for the firm's output is greater (larger cut in emp if the w increases causing mc up and demand down by consumers) 3. The greater labours share in total costs of production 4. The greater the supply elasticity of other factors of production |
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cross elasticity of factor demand?
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the sensibility of D for a particular factor (input) to the prices of other inputs
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if cross elasticity of factor demand is positive...
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the 2 inputs are substitutes in production
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if immigrants and native workers are perfect complements?
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native workers can then specialise better, and may be able to increase their productivity. Competing natives will have lower wages, complementary natives will have higher wages. D curve moves outwards because some increase their VMPE
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2 key assumptions of cobweb model:
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1. time is needed to produce skilled workers
2. persons decide to become skilled workers by looking at conditions in the labour market at the time they enter school. Arises when people are misinformed |
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how many people do perf discriminating monopsonist hire?
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same as in competitive market, but each worker paid their reservation wage
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hedonic wage theory?
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workers max utility by choosing wage-risk combos that offer them the greatest amount of utility
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self selection bias -
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workers may select themselves into jobs for which they are better suited. (and therefore tests of lifetime earnings hypothesis must correct for this).reasearch proves it is true.
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schooling as a signal relies on...
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separating eqbm, where low and high productivity workers voluntarily signal their respective probabilities given y years of education
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4 reasons wage differentials exist:
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1. productivity difs
2. human cap investment difs 3. ror to skills will vary across markets and over time according to s&D 4. Age |
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why are earnings skewed?
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ppl with higher ability will have higher wages not just bc they r more productive immediately, but bc they will invest in even more human capital, stretching out the distribution
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coeff of variation=
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st d / e
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lorenz curve:
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reports the cumulative share of y accruing to the quintiles of hholds
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gini coef calc:
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a/(a+b). (a+b)=0.5 multiply each cumulative share of income by 0.2, add 0.1, this is area B. A = 0.5-B.
1=perf equality, 0= inequality |
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prob with gini:
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moving from bottom to top quintile gives same number change as moving from second quintile to the top one, but the redistributions are far from identical
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wage gap calc =
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(90-10)/10 *100
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nz inequality has increased since the 80's relative to other countries
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yes
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what causes changes in inquality? (6)
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1. occupational distribution - e.g. high paying jobs have increased, lowest-paying occupations more or less constant (destruction of middle income jobs).
2.Changes in relative wages- increased disparit of earnings among those who remained in high and low paying jobs. may be due to increased disparity in wages OR in hours worked. 3. Changes in return to human capital 4. increased physical capital helped to increase t productivity of skilled workers 5. changes in institutional factors (unions guaranteed better wages for low skilled workers, but unions have decreased) 6. changes in real min wage |
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what causes surge in demand for skilled workers and decline in d for unskilled?
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1. increasing globalisation
2. skill-based technological change - current tech favours higher skilled/educated workers 3. shifts in demand for products (more laptops) |
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criteria for superstars (2)
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1. sellers arent perfect subs
2. only pros w v large markets can generate superstar salaries |
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why immigrants usually earn less than more than natives in the immigrant vs. natives age-earnings profile?
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initially earn less bc lack US specific skillse.g. job credentials and job seeking info. later earn more bc generally those who r let in r those who the country views will be beneficial to economic growth, and bc risky to leave so must be quite able.
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what is the roy model?
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considers the skill composition of workers in the source country
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roy model - positive selection;
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immigrants who r very skilled do well in the host country (get paid more for their skills than in source country when very skilled)
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roy model - negative selection
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immigrants who r unskilled do not do well in host country
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immigrant surplus:
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measures the increase in nat Y that occurs as a result of immigrants (to domestic capital holders)
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employee discrimination result:
(non-discriminatory firm) |
implies a segregated wf bc they wont want to pay whites a compensating wage differential, doesnt generate a wage differential bt whites and blacks, and doesnt affect firm profits
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2 ways statistical discrimination influences wages of minorities:
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1. Same test average but different intercept.
2. two groups have same mean test score but test is more informative for one group.will make one line steeper |
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oaxaca decomposition
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decomposes the raw wage differential into:
1. a portion due to men and women having dif skills 2. a portion due to labour market discrimination |
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3 determinants of union membership
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1. wage-employment package
2. employment cutbacks (decrease membership) 3. elasticity of firms demand curve for labour |
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demand for union jobs dependent on: 3
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size of wage increase
2. amount of employment loss 3. costs of union membership |
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supply of union jobs depends on: (4)
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1. the ability to organise a wf
2. legal environment affecting union activities 3. resistance of mgmt 4. whether the firm is making excess rents |
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Hicks paradox
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the fact that irrational strikes occur
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threat effects (union)
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nonunion firms offer higher wages to reduce incentives of workers to unionise
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spillover effects (unions)
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when workers unemployed in the union sector enter the nonunion sector, increasing the supply of nonunion labour and decreasing wages.
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exit-voice hypothesis-
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formal grievance procedure should decrease turnover, increase probability, raise profits. But it doesnt increase profits enough to offset the increased wages unions demand
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