Suppose the rural wage is $3 per day. Urban modern sector employment can be obtainedwith 0.4 probability and pays $8 per day. Using this information, what would be the rationaldecision of rural population?1) since urban wage rates are much higher than the rural wages, they encourage people tomigrate in spite of high level of unemployment.2) people would be indifferent between migrating or staying3) people are rational; the high unemployment rate would reduce their rural-to-urbanmigration.4) since people are risk neutral, it would be rational not to migrate in order to avoid risks.

The key reasons are:The urban modern sector wage ($8 per day) is significantly higher than the rural…

Answered: Suppose the rural wage is $3 per day.…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter17: Income, Poverty, And Health Care

Section: Chapter Questions

Problem 1P

See similar textbooks

Similar questions

Optimal unemployment insurance: Consider the following two proposals toreform unemployment insurance. Explain the arguments for and against eachreform.(a) Te insurance payment would be increased so that it replaced 100% of aworker’s regular labor income for 26 weeks.(b) Each worker would be paid a lump sum equal to 10 weeks of his or herlabor income at the start of the spell of unemployment. Tere would thenbe no other payments.
One proposal includes increasing the EITC for childless workers to provide additional assistance for many poor workers. While an increase in the EITC would increase resources to qualifying childless workers, what impact will it have on their working decision? Assume a basic hours towards leisure and income towards consumption model. a. If qualifying childless workers already have a strong preference to work so they are already choosing to work (ex: 10 hours), an increase in the EITC could lead to a new choice involving fewer hours spent working, more hours spent towards leisure and more income towards consumption. Thus, the EITC expansion could discourage work. b.If qualifying childless workers already have a strong preference to not work so they are already choosing to work very littleand mostly enjoy leisure, an increase in the EITC could lead to a new choice involving more hours spent working, fewer hours spent towards leisure and more income towards consumption. Thus, the…
Domestic low-skilled workers each work 1,920 hours a year on average, and they receive $8 per hour. Suppose that, statistically, for each 10 % rise in the number c employed immigrants in low-skilled jobs, the annual number of hours worked by domestic low-skilled workers falls by 3%. At the same time, their wage declines by 1%. There are 300,000 Immigrants working in low-skilled jobs, and 120,000 more are about to come, all of whom will also find low-skilled jobs. Calculate the drop in annual income of an average domestic worker in dollars. Enter your answer as a positive number in the box below and round to two decimak places if necessary. Round your intermediate calculations to two decimal places.
There are 50 workers in the economy in which all workers must choose to work a safe or a risky job. When it comes to accepting a risky job, Worker 1’s reservation price is $5; worker 2’s reservation price is $6, worker 3's reservation wage is $7, and so on. Assume there are exactly 12 risky jobs. (a) What is the equilibrium wage differential between safe and risky jobs? Which workers will be employed at the risky firm? (b) Suppose now that an advertising campaign, paid for by the employers who offer risky jobs, stresses the excitement associated with “the thrill of injury,” and this campaign changes the attitudes of the work force toward being employed in a risky job. Worker 1 now has a reservation price of $1, worker 2’s reservation price is $2, and so on. There are still only 12 risky jobs. What is the new equilibrium wage differential? c) What is the maximum the firm should be willing to pay for its ad campaign?
Suppose there are 100 workers in the economy in which all workers must choose to work a risky or a safe job. Worker 1’s reservation price for accepting the risky job is $1; worker 2’s reservation price is $2; and so on. Because of technological reasons, there are only 10 risky jobs.a. What is the equilibrium wage differential between safe and risky jobs? Which workers will be employed at the risky firm?b. Suppose now that an advertising campaign paid for by the employers who offer risky jobs stresses the excitement associated with “the thrill of injury,” and this campaign changes the attitudes of the workforce toward being employed in a risky job.Worker 1 now has a reservation price of $10 (that is, she is willing to pay $10 for the right to work in the risky job); worker 2’s reservation price is $9; and so on. There are still only 10 risky jobs. What is the new equilibrium wage differential?
The absolute value of the slope of the consumption-leisure budget line is the after-tax wage, w. suppose some workers earn w for up to 40 hours of work each week and then earn 2w for any hours worked thereafter (called overtime). Other workers may earn w for up to 40hours of work each week then only earn .5w thereafter as working more than 40 hours requires getting a second job, which pays an hourly wage less than their primary job. Both types of workers experience a kink in their consumption-leisure budget line. a. Graph in general terms the budget line for each type of worker. b. Which type of worker is likely to work up to the point of the kink, and which type of worker is likely to choose a consumption-leisure bundle far away from the kink?
Are minimum-wage laws a better explanation forstructural unemployment among teenagers or amongcollege graduates? Why?
Follow-up questions. d. Let D be the difference in marginal product between an experienced worker and a new worker (MPe − MPn). Suppose that robust, experienced workers would prefer not to pool with sickly workers at their firm, and so they seek out a new job with an employer who does not offer health insurance. What will be the wage of the robust worker at the new job during the first year there? Keep in mind, these workers will no longer be experienced because they will be adapting to a new firm. Under what conditions will it make financial sense for the robust worker to change jobs? Your answer should be an inequality that includes D, θ, Vr, and Vs. e. D is a measure of job-specific human capital; as workers learn the job, they become more productive so D > 0. However, not every job or industry has the same value for D. In some lines of work D is low, while in others D is high, simply because of the nature of the work. Given the results, you have seen in this problem, in which…
A4 unemployment insurance might be redundant. If a job faces a high risk of termination, then this will be priced into the wage as a compensating differential. Do you agree or disagree that risk of unemployment should be accounted for as a compensating differential, and that unemployment insurance is unnecessary? Why?
Income $560 $320 B 60 40 0 Work T Suppose this worker's union negotiates an increase in the straight-time wage from $8 to $9.33 per hour with no bonus for overtime. This plan would allow earnings of $560 at 60 hours per week. Assuming this worker can freely choose the number of hours worked, he will choose to work more than 60 hours per week. 60 hours per week. more than 60 hours per week if the income effect dominates; less otherwise. fewer than 60 hours per week. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.You will get up vote for sure.
A worker plans to retire at the age of 65, at which time he will start collecting his retirement benefits. Then there is a sudden change in the forecast of inflation when the worker is 63 years old. In particular, inflation is now predicted to be higher than it had been expected so that the average price level of market goods and wages is now expected to be higher. What effect does this announcement have on the person’s preferred retirement agea. If retirement benefits are fully adjusted for inflation?b. If retirement benefits are not fully adjusted for inflation?
Ispart B D b) Which wage rate should the employer offer? Why? D 10 20 30 60 70 a) Which point is the most desirable one for the employer? Is it also attainable? Best Response •Isacast Wage Rate c) For which wage rates would the employee turn down a job offer? do1-7 19:2 91 6fc3.jp

SEE MORE QUESTIONS

Recommended textbooks for you

Exploring Economics

Economics

ISBN:

9781544336329

Author:

Robert L. Sexton

Publisher:

SAGE Publications, Inc

Exploring Economics

Economics

ISBN:

9781544336329

Author:

Robert L. Sexton

Publisher:

SAGE Publications, Inc

SEE MORE TEXTBOOKS