13th Edition
Roger A. Arnold
ISBN: 9781337617406




13th Edition
Roger A. Arnold
ISBN: 9781337617406
Textbook Problem

Workers in labor market X do the same work as workers in labor market Y, but they earn $10 less per hour. Why?

To determine

Reasons for the wage difference in labor market.


The wage rate will be different in different market conditions. There are different factors such as demand for labor, non-pecuniary aspects of job, heterogeneity of labor, training cost of labor, and cost of mobility of labor.

  • Demand for labor: When the demand for labor is different in each market, it causes a difference in wage rate.
  • Non-pecuniary aspect:  Non-pecuniary aspect is the supply condition of the job. For example, working in coal mine is less attractive than working as a tour guide, and this makes a difference in the supply of labors in both the works and causes a difference in wage rate.
  • Heterogeneity of labor:  When the labors who work in a market are not able to work in another market, it causes wage difference...

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