LABOR ECONOMICS (LL+ACCESS)
8th Edition
ISBN: 9781264909339
Author: BORJAS
Publisher: MCG
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Question
Chapter 9, Problem 5P
(a)
To determine
Determine the male-female differential in the labor market.
(b)
To determine
Determine how much of the wage differential could be discrimination in terms of Oaxaca-Blinder decomposition.
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Consider two states that adopt different laws concerning labor unions.
The following graph shows the labor market in a state in the North. Initially, the market-clearing wage there is $10.00 per hour.
Suppose that the legislature in this northern state passes laws that make it easy for workers to join a union. Through collective bargaining, the union
negotiates a wage of $12.50 per hour.
Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.
Graph Input Tool
Market for Labor
20.0
I Wage
(Dollars per hour)
17.5
Supply
2.50
Labor Demanded
(Thousands of
workers)
Labor Supplied
(Thousands of
workers)
15.0
875
125
12.5
10.0
7.5
Demand
5.0
2.5
125
250
375
500
625
750
875
1000
LABOR (Thousands of workers)
Enter $12.50 into the box labeled Wage on the previous graph.
Hint: Be sure to pay attention to the units used on the graph.
At the union wage,
375,000 union workers will be employed.
The following graph shows the…
The following data give the hourly wage rates (Rands) for a sample of 20 workers selected from a largecompany.12.50 9.45 13.85 7.25 8.70 14.60 11.75 14.50 10.80 12.457.50 15.90 9.75 11.50 13.30 6.25 15.50 12.80 5.35 9.50
(vi) Draw an OGIVE curve corresponding to the data and use it to estimate the median.
Consider a simple demand-and-supply model of a competitive labour market in a small town. The demand and
supply curves for labour are given by
Demand: w=24-3LD
S
Supply: w=6+3L
where w is the wage ($ per hour) and L is the number of hours of employment (measured in thousands of hours
per month).
a. Use the line drawing tool to plot the demand and supply curves in the graph at the right. Use points with
labour hours value of 0 and 5 to draw the lines. Label the lines properly.
Carefully follow the instructions above, and only draw the required objects.
Wage ($ per hour)
24-
22-
20-
18-
16-
14-
12-
10-
8-
6-
4-
2-
0-
0
Labour Market
2
3
4
Labour (thousands of hours per month)
5
Chapter 9 Solutions
LABOR ECONOMICS (LL+ACCESS)
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- Consider a simple demand-and-supply model of a competitive labour market in a small town. The demand and supply curves for labour are given by Demand: w= 22 - 3LD Supply: w=4+3LS where w is the wage ($ per hour) and L is the number of hours of employment (measured in thousands of hours per month). a. Use the line drawing tool to plot the demand and supply curves in the graph at the right. Use points with labour hours value of 0 and 5 to draw the lines. Label the lines properly. Carefully follow the instructions above, and only draw the required objects. C Wage ($ per hour) 24- 22- 20- 18- 16- 14- 12- 10- 8- 6- 4- 2- 0- 0 Labour Market 2 3 4 1 Labour (thousands of hours per month) + 5arrow_forwardAlternative explanations of wage disparities Suppose that a labour economist finds that one of her research subjects has earned significantly higher wages throughout his lifetime than would be predicted by standard measured variables. The economist also noted that each of the subject's positions was found through connections at his family's exclusive country club. Which one of the following most likely explains this person's unusually high earnings? a) Effort b) Compensating differentials c) Chance d) Efficiency wages Suppose that Frances receives higher pay at her workplace than her colleagues do, even though they perform essentially the same type of work. If Frances's productivity is about 25% higher than that of each of her colleagues, which of the following wage concepts can explain this wage disparity? Check all that apply. a) Efficiency wages b)The superstar phenomenon c) Discrimination d) Human capital e)…arrow_forwardSuppose that education is the only factor that affects productivity and that an additional year of education raises wages by 2%. Suppose in 2011 gender wage gap was 13%, and the average man had 15 years of education while the average women had 14 years of schooling. a) Using the wage gap decomposition technique, calculate how much of the 13% wage differential is due to discrimination? b) Now suppose in 2021 the gender wage gap is 10%, but the average woman’s education level is increased to 17 year and the average man’s education increases to16 years. (Assume that the return to education stays same at 2%), Was there a decrease or an increase in wage discrimination in the decade? Why?arrow_forward
- Assume we are investigating gender differences in labor market outcomes and we are analyzing employee discrimination. When discussing employee discrimination, the typical assumption is that two groups of workers are perfect substitutes. Some research, however, suggests that worker productivity rises when the diversity of the workforce in a firm increases. This implies that the marginal productivity of male workers increases as more female workers are hired. If employee discrimination occurs against women, under what conditions will a gender-segregated workforce exist? Will a wage gap between men and women exist? Explain your answer.arrow_forwardSuppose that 15 states decrease the length of the standard work week from 40 to 35 hours. You are interested in the effects of this change on worker productivity. What effects might you expect to see? How would you conduct a difference-in-difference analysis to estimate the impact? What assumption must hold for the difference-in-difference analysis to be valid?arrow_forwardSuppose that a professor of labor economics finds that one of their research subjects has earned significantly higher wages throughout their lifetime than would be predicted by standard measured variables. The economist also notes that each of the subject's job roles was linked to social connections established at their family's yacht club. Which item from the following list most likely explains this individual’s high earnings? Chance Efficiency wages Compensating differentials Effort Suppose that Juanita receives higher pay from her company than her colleagues, despite the fact that they perform basically the same type of role. If Juanita's productivity is about 37 percent higher than that of her second-best colleague, which of the concepts from the following list can explain this wage disparity? Check all that apply. Human capital Chance Compensating differentials Efficiency wages Effortarrow_forward
- Suppose male wages are determined by the earnings function WM = 25 + 0.40EM and female wages are determined by the earnings function WF = 15 + 0.20EF. If women have 10 years of experience and men have 20, what is the gender wage gap? How much can be attributed to human capital differences and how much is unexplained, and therefore attributed to discrimination? Show this scenario on a graph of both the male and female earnings functionsarrow_forwardJenni owns a cooking school that specializes in seafood. Jenni has a limited supply of kitchen space for her instructors to use for lessons. As a result, each successive instructor adds less to Jenni's output of lessons. Cooking lessons cost $35 per hour. The table below shows, for each successive instructor, Jenni's output quantity, marginal product of labor, and value of marginal product. The VMP was found by multiplying the additional number of cooking lessons each additional worker provided (MPL) by $35, which was the price per lesson. Marginal Value of Quantity of Quantity product marginal product (VMP) lessons of labor of labor (hours) (MPL) 1. 10 10 $350 2 17 $245 3. 23 9. $210 4. 28 5. $175 32 4 %24140 35 3. $105 37 $70 38 $35arrow_forwardNeed help ASAP, will give thumbs up: Consider an empirical wage equation of the form: log(W) = a + b(EDUC) + c(EXP) + d(EXPSQ) + u where the components are defined as: W = hourly wage rate log() is natural logarithmic function EDUC = completed years of school EXP = work experience EXPSQ = years of work experience squared (i.e. EXP times EXP) u = unobservable determinants of the hourly wage rate With data on the relevant variables for a sample of workers, the parameters a, b, c, and d can be estimated. QUESTION: What does human capital theory predict about the parameters of this wage equation? ANSWER CHOICES: b>0, c>0, d>0 b>0, c>0, d<0 b>0, c<0, d>0 b<0, c>0, d<0 b<0, c<0, d>0 Answerarrow_forward
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