lec5 - ECONOMICS 175 Professor Ronald D Lee Lecture 5 ASUC...

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Professor Ronald D. Lee 2/3/09 Lecture 5 ASUC Lecture Notes Online is the only authorized note-taking service at UC Berkeley. Do not share, copy or illegally distribute (electronically or otherwise) these notes. Our student-run program depends on your individual subscription for its continued existence. These notes are copyrighted by the University of California and are for your personal use only. D O N O T C O P Y Sharing or copying these notes is illegal and could end note taking for this course. ANNOUNCEMENTS The entire waitlist has been cleared. Problem set 1 is due today. Problem set 2 will be posted by the end of this class, it is due February 17 th . For future reference you can turn the problem set into the Demography building at the front of the building. This week sections and office hours will be at usual times and places this week. Reading for next time will be pages 145-165 in the reader . It is the article by Claudia Goldin . LECTURE Outline 1.) Diagrammatic analysis of the standard labor supply model 2.) Women’s Work and Economic Development Question 1 : Comparing China to the US: which statement is true? A. Fertility is higher in China and life expectancy is lower B. Fertility is lower in China and mortality is higher C. Fertility and mortality are both lower in China D. Fertility and mortality are both higher in China B is the correct answer. Model of Labor Supply . This is a standard labor- leisure trade off model. We should not be thinking of leisure, but home production. The household benefits from money earned and home production factor into the household utility equation. The problem then is how to maximize the family utility by choosing an appropriate amount of time for one of the spouses to work at home versus working in the market. There is also the question of who actually makes this decision. Pindyck and Rubinfeld have optional reading on this section. It is page 120 to 123 in your reader. It may serve as a good review. Standard Model of Women’s Labor Supply (implicit in Mammen-Paxson reading). We have some assumptions. First, family income comes from husband’s wages, wife’s wages and from asset income. For this model, I will assume the husband’s income and asset values as given so we will only look at how much the wife will work. I will assume that all family income is consumed (no saving and no dis-saving). Household utility depends on family consumption and the wife’s leisure. Y = family income other than the wife’s work (Y=husband’s income + asset income) w = wife’s potential wage per hour of work T = total discretionary time for wife L = wife’s leisure or home production time C = consumption of market goods by the household T-L = labor supply or amount of time a wife works in the labor market. If T = L then the labor supplied to the market is zero. w(T-L) wife’s earnings
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lec5 - ECONOMICS 175 Professor Ronald D Lee Lecture 5 ASUC...

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