Concept explainers
The reason for a higher level of wage in the developed country.
Explanation of Solution
In general, the wage level in the developed country is higher than the other country. The main reason for this increase in the level of wage is the higher level of labor productivity. Wage is determined by the marginal productivity of the labor. The output per worker is higher in the developed country. The reason for this high productivity is abundant natural resource relative to the labor size and the capital per worker is very high. The developed country uses advance technology, provides trainings. These factors lead to an increase in the marginal productivity of the labor that causes an increase in the wage level.
Concept introduction:
Marginal productive wage theory: The marginal productive wage theory states that the wage of the labor should be equal to the marginal productivity of the labor.
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Chapter 15 Solutions
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