# 21809 - The five-part framework Suppose we are considered...

• Notes
• 3

This preview shows pages 1–2. Sign up to view the full content.

The five-part framework… Suppose we are considered with poverty. Poverty is a function of unemployment, total wage bill (the total amount of wages paid to workers) If we want to broaden our analysis from unemployment alone to also take account of how much people earn when they work, we might consider the function above. Policy #1: Urban employment creation Policy #2: Rural development Working with the specific example we went thru on Monday, take the same numbers and add to them by making three sets of calculations: the original situation – where urban employment creation is followed – and where rural development is followed; what would be the effect of these on unemployment and the wage bill. Originally, we had a \$3 wage in the urban sector, \$1 wage in the rural sector. 100 people employed in urban, everybody employed in rural sector, 200 unemployed. Policy of urban employment creation results in 230 unemployed and the policy of rural development results in 100 unemployed What is the wage bill in the original situation? \$1000 =\$3*100 + \$1*700 = 1000 (unemployed people – 200 – do not get paid anything) What is the wage bill when urban employment creation is followed? \$1000 = we add 15 jobs, so \$3*115 + \$1*655 What is the wage bill when rural development is followed? \$3*100 + \$1.5*800 = \$1500 (unemployed people – 100) policy two raises wages of rural development to \$1.5 Evaluating the function: Policy #1: increases poverty because there are now more people unemployed Policy #2: poverty goes down, we evaluate looking at unemployment which goes down If we look at wage bill, it goes up. So poverty also goes down. If we switch our attention from just unemployment to poverty, a policy of urban employment creation is going to raise poverty and a policy of rural development is going to lower poverty. We can make a stronger statement using this welfare judgment function, and saying a policy of rural development will also reduce poverty by considering other factors Bottom-line management, would insist on: Policy analyst must answer three very basic but very crucial questions: 1. What is the bottom-line objective? (What is it you are trying to achieve? What is the maximand –

This preview has intentionally blurred sections. Sign up to view the full version.

This is the end of the preview. Sign up to access the rest of the document.
• Spring '09
• FIELDS
• urban employment creation

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern