Econ 339 Fall 2009 Problem Set 4

# Econ 339 Fall 2009 Problem Set 4 - 5 Explain why the wage...

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Econ 339 Fall Quarter 2009 Problem Set 4 Due Date: 11/4/09 Solve the following Problems. Show your work. 1. Chapter 5 Problems: 5-2, 5-3, 5-4, 5-5, 5-6, 5-7 2. Chapter 6 Problems: 6-1, 6-3, 6-4, 6-7 3. Suppose wages and health insurance are the only two job characteristics workers care about. Describe the relationship between the wage level in a particular job and whether the job offers health insurance if the government does not require employers to offer health insurance to their workers. What happens to the wage structure if the government requires all firms to provide a standard package of health insurance to their workers? 4. Suppose workers differ in their ability, but have the same discount rate. Is it possible for the more able workers to choose less schooling?

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Unformatted text preview: 5. Explain why the wage distribution is positively skewed. 6. Assume firms pay a high wage (w H ) to high-ability workers and a low wage (wL) to low-ability individuals. Low-ability worker incur a cost of 1 for every period of education (y). For high-ability workers this cost is 1 < α . a) Derive the condition for a low-ability workers that ensures that he will NOT acquire the education necessary to obtain a high paying job. b) Derive the condition for a high-ability workers that ensures that he will acquire the education necessary to obtain a high paying job. c) Use the above conditions to obtain the range of values for y that ensures a separating equilibrium. d) Calculate this range of values for w H =5, w L =2.5, 5 . =...
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Econ 339 Fall 2009 Problem Set 4 - 5 Explain why the wage...

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