Principles of Economics- Mankiw (5th) 468

Principles of Economics- Mankiw (5th) 468 - 482 PA R T S E...

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482 PART SEVEN ADVANCED TOPIC CASE STUDY INCOME EFFECTS ON LABOR SUPPLY: HISTORICAL TRENDS, LOTTERY WINNERS, AND THE CARNEGIE CONJECTURE The idea of a backward-sloping labor supply curve might at first seem like a mere theoretical curiosity, but in fact it is not. Evidence indicates that the labor supply curve, considered over long periods of time, does in fact slope backward. A hun- dred years ago many people worked six days a week. Today five-day workweeks are the norm. At the same time that the length of the workweek has been falling, the wage of the typical worker (adjusted for inflation) has been rising. Here is how economists explain this historical pattern: Over time, advances in technology raise workers’ productivity and, thereby, the demand for labor. The increase in labor demand raises equilibrium wages. As wages rise, so does the reward for working. Yet rather than responding to this increased incentive by working more, most workers choose to take part of their greater prosperity
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This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.

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