HW 4 Answers - Homework #4 Solutions Chapter 8: #2. Analyze...

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Homework #4 Solutions Chapter 8: #2. Analyze why college professors generally earn less than their professional PhD counterparts who are employed by corporations. College professors generally earn less than their professional counterparts because of compensating wage differentials. Compensating differentials are defined as the extra pay that an employer must provide to compensate a worker for some undesirable job characteristics that do not exist in alternative employment. College professors generally have more flexible work schedules, and fewer bureaucratic interferences as compared to their private sector workers. In order to put up with these “undesirable” non-wage amenities, corporations must pay private sector workers more to attract workers. #3. Many of the lowest-paid people in society-for example, short-order cooks-also have relatively poor working conditions. Hence the theory of compensating wage differentials is disproved. The theory is not disproved. The lower wages paid for unskilled work (i.e. short-order cook) may outweigh the relatively high wages that are necessary to draw these unskilled workers into jobs with unsafe, hazardous, dirty working conditions. #11. Suppose that (a) employers must pay higher wages to attract workers from wider geographic areas and hence higher wages are associated with longer commuting distances (less of the amenity “closeness of job to home”) and (b) female have greater tastes for having jobs close to their homes than do males. Use the hedonic wage model to show
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HW 4 Answers - Homework #4 Solutions Chapter 8: #2. Analyze...

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