gs_-21_--_Incomes_of_factors_--_Rent_--_Interest_and_capital

gs_-21_--_Incomes_of_factors_--_Rent_--_Interest_and_capital...

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1 2/12/2010 Econ11 - Lecture #21 1 AFTER A FEW MORE LECTURES WE WILL BE SHIFTING TO MACROECONOMICS ( RED BOOK) LECTURE 21: WAGE & SALARY; RENT; PROFIT ± Wage -- Labor income (continued) ± Rent – Land rent & Pure rent ± Profit WAGE DIFFERENTIALS AMONG COUNTRIES WITH DIFFERENT LABOR MARKETS
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2 INTERNATIONAL WAGE DIFFERENTIALS L IC EMPLOYMENT 0 Demand Supply W IC US $ Wage Rate INDUSTRIAL COUNTRIES: US, EUROPE, JAPAN, ETC. 0 L PC EMPLOYMENT Demand Supply W PC US $ Wage Rate POORER COUNTRIES: LESS DEVELOPED COUNTRIES 2/12/2010 Econ11 - Lecture #21 5 REASONS WHY WAGE RATES BY COUNTRIES DO NOT EQUALIZE ± Barriers to factor movements – labor and capital markets – across international boundaries ± Trade barriers – goods are not traded freely because of trade barriers ± Relatively lower demand for labor in poor countries ± Productivity: Less capital (both machinery and human skills) to work with ± Relatively more supply of labor DEMAND FOR LABOR : DOMESTIC DEMAND AND OVERSEAS EMPLOYMENT
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3 2/12/2010 Econ11 - Lecture #21 7 PHILIPPINE DEMAND FOR LABOR HAS BEEN INADEQUATE ± For many years, a low rate of domestic economic growth ± High supply of labor – due to high population growth ± Low wage rates at home ± International mobility of labor – encouraged by government policy ± There is a high demand for job search in foreign countries by Filipinos 2/12/2010 Econ11 - Lecture #21 8 DEMAND FOR PHILIPPINE LABOR Domestic Demand in US Dollar equivalent Rest of the World Demand 0 L PC EMPLOYMENT Demand Supply W PHIL US $ Wage Rate L IC EMPLOYMENT 0 Demand Supply W IC US $ Wage Rate 2/12/2010 Econ11 - Lecture #21 9 QUESTIONS FOR STATE POLICY: IF WE WANT TO RAISE DOMESTIC EMPLOYMENT AND INCOMES ± Raise the level of economic growth at home ± Raise level of domestic investment o Focus on saving increase (to finance investment) o Attract foreign direct investment (to substitute and to add to lack of savings) ±
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gs_-21_--_Incomes_of_factors_--_Rent_--_Interest_and_capital...

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