Lec_17_labor_demand

Lec_17_labor_demand - Chapter 12 Economics of Information...

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1 • Second exam will cover only Chapters 10- 12 • Final exam will be cumulative for entire course • Answers to practice second exam will be reviewed in discussion sections week of Wed Feb 18 to Mon Feb 23 Chapter 12: Economics of Information F. Resolving asymmetric information with costly signaling G. Insurance markets H. Causes of the financial crisis • Risky debt (mortgages, credit card) was sliced into tranches • Senior tranches were judged safer than they were because default rates and correlations were underestimated • Default rates and correlations were underestimated because they were inferred from a period when house prices never fell appreciably • However, success of securitization changed house prices and the underlying correlations New household mortgage debt issued in 2004, 2005, and 2006 $3.6 trillion Agency $1.6 trillion Jumbo $1 trillion Alt-A $1.7 trillion Subprime Source: Ashcraft and Schuermann (2007). Household mortgage debt: 1995: $3.5 trillion 2007: $11.1 trillion Source: Federal Reserve Flow of Funds U.S. inflation-adjusted price of houses Source: Congressional Budget Office
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2 Chapter 13: Labor Markets, Poverty, and Income Distribution A. Demand for labor Joe’s Muffler Shop Inputs: • building • tools • utilities • labor Output:
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Lec_17_labor_demand - Chapter 12 Economics of Information...

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