LABOR ECONOMICS LOOSELEAF 8/E
8th Edition
ISBN: 9781264010516
Author: BORJAS
Publisher: MCG
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Chapter 6, Problem 6P
To determine
Derive the marginal
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Suppose Fred's wage-schooling relationship is given by
Years of Schooling
Earnings
9
$28,000
10
$31,150
11
$33,700
12
$35,900
13
$37,400
14
$38,500
Derive the marginal rate of return schedule. When will Fred quit school if his discount rate is 5 percent? What if the discount rate is 10 percent?
Suppose Carl’s wage-schooling locus is given by
Years of Schooling
Earnings
10
$30,000
11
$35,000
12
$40,000
13
$45,000
14
$50,000
15
$55,000
16
$60,000
17
$65,000
Derive the marginal rate of return schedule. When will Carl quit school if his discount rate is 14 percent? What if the discount rate is 9 percent?
Imagine that the wage-schooling locus is given by w(s)=s^(1/3). What will be the optimal level of education for an individual to take if next period’s earnings in any given time are worth 95% of current earnings for that individual?
Answer is s=20/57
I need step by step calculations
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Similar questions
- Suppose Carl’s wage-schooling locus is given byYears of Schooling Earnings 9 $18,500 10 $20,350 11 $22,000 12 $23,100 13 $23,900 14 $24,000Derive the marginal rate of return schedule. When will Carl quit school if his discount rate is 4 percent? What if the discount rate is 12 percent?arrow_forward3 Imagine that the wage-schooling locus is given by w(s)=s^(1/3). What will be the optimal level of education for an individual to take if next period’s earnings in any given time are worth 95% of current earnings for that individual? ---- HINT: the answer is s=20/57. I need step by step solutionarrow_forwardHow does skill atrophy provide an explanation for differentiation in earnings?arrow_forward
- How does path dependency provide an explanation for differentiation in earnings between men & women?arrow_forwardJill is planning the timing of her on-the-job training investments over the life cycle. What happens to Jill’s OJT investments at every age if a. The market-determined rental rate to an efficiency unit falls? b. Jill’s discount rate increases? c. The government passes legislation delaying the retirement age until age 70? d. Technological progress is such that much of the OJT acquired at any given age becomes obsolete within the next 10 years?arrow_forwarda. Draw the wage-schooling locus for someone for whom the returns to schooling decrease through college but increase after college. (Assume college is completed after 16 years of schooling and that one can receive at most 6 years of postcollege schooling.) b. On a new graph, plot the marginal rate of return to schooling implied by the wage-schooling locus described in part a. c. What can be said about a college graduate who faces the wage-schooling locus described in part a?arrow_forward
- why in her calculation of the cost of going to college, an economist would include the amount of forgone earnings over the years spent at college?arrow_forwardDiscuss how empirical studies estimate the rate of return to schooling and the methods used to avoid the problem of ability bias.arrow_forwardDerive the Stopping Rule for Investments in Education.arrow_forward
- Show that the competitive labor market compensates workers for the probability that they will be laid off.arrow_forwardHow would you recommend a high school student develop soft skills as an investment in their human capital? Explain in a paragrapharrow_forwardWhen focusing on a married couple, one person’s non-labor income includes the laborearnings of his/her partner. Using a graph of budget constraints and indifference curves,describe what would happen to the labor supply of one spouse if the other experiences aninvoluntary job loss. Your answer does not depend on whether the spouse you’regraphing is initially supplying labor or not.arrow_forward
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