Lecture 7 - Welfare WelfareImplications Who Wholoseswhat Q:...

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elfare Implications Welfare Implications
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ho loses what? Who loses what? : What is the pareto optimal level of Q: What is the pareto optimal level of employment? : What is the DWL associated with Q: What is the DWL associated with monopsony? Q: What is the size of the producer surplus? Q: What is the size of the consumer surplus?
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Welfare and Monopsony Under Wage Taker: Producer surplus = B + C , Worker Surplus = A +D +E , No DWL Under Monopsony: Producer surplus = B + A , Worker Surplus = E , DWL= C+D rms take A from workers and society loses C+D but firms prefer monopsony since A>C Firms take A from workers, and society loses C+D, but firms prefer monopsony since A>C. (this is socially inefficient)
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cture 7 Lecture 7 Employer Side Frictions 4
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oadmap Roadmap aining Training Training and incentives Quasi Fixed Costs Hiring Costs 5
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aining Training Q: As an employer, why would you train? What kind of training would you provide? Why might you not train? 6
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Firms train workers if…. The increase in productivity increases marginal revenue by more than it increases their wage. The worker remains with the form long enough for the firm to benefit. Firms pay wage W, but get MRP from worker. Benefit at time t is L . Since a dollar tommow is worth (1/(1+r)) times a dollar 1 day the PDV of training is [ ] and t e costs L T MRP W RP W 1 today. .. the PDV of training is [] and the costs (1 ) are L t t MRP r some fixed amount .
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This note was uploaded on 01/09/2010 for the course ILRLE 2400 at Cornell.

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Lecture 7 - Welfare WelfareImplications Who Wholoseswhat Q:...

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