Unformatted text preview: 5. Assume that the decision to participate in the labor market only depends on the first letter of the last name of an individual and some random error term (for example, A-L participate, M-Z don’t, 1 i i participate Letter γ ε = + ⋅ + ). You want to estimate the labor supply elasticity. Naturally, you will only be able to use individuals in your analysis that work. Will your estimates be unbiased? (yes, this is a hard question) 6. Explain why an incorrectly measured hours variable will lead to biased estimates of the labor supply elasticity. 7. Is there a welfare policy that includes payments to low-skilled workers that does not include a detrimental effect on work incentives?...
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This note was uploaded on 12/04/2008 for the course ECONOMICS 339 taught by Professor Habermalz during the Winter '07 term at Northwestern.
- Winter '07