Principles of Economics- Mankiw (5th) 422 - 434 PART SIX...

Principles of Economics- Mankiw (5th) 422
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434 PART SIX THE ECONOMICS OF LABOR MARKETS largely attributable to natural ability, effort, and chance. ± Some economists have suggested that more educated workers earn higher wages not because education raises productivity but because workers with high natural ability use education as a way to signal their high ability to employers. If this signaling theory were correct, then increasing the educational attainment of all workers would not raise the overall level of wages. ± Wages are sometimes pushed above the level that brings supply and demand into balance. Three reason for above-equilibrium wages are minimum-wage laws, unions, and efficiency wages. ± Some differences in earnings are attributable to discrimination on the basis of race, sex, or other factors. Measuring the amount of discrimination is difficult, however, because one must correct for differences in human capital and job characteristics. ± Competitive markets tend to limit the impact of
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