econ 1 lecture 8

econ 1 lecture 8 - LABOR Krugman and Wells devoted mostly...

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LABOR Krugman and Wells devoted mostly to labor as a commodity; i.e., the dullest part of what we have to say about labor issues; unlike all other “commodities,” labor has a personality, and a heartbeat. Discussion (in text) focuses around: 1. demand, supply and market for labor, 2. very brief mention of unions: pp. 395-96, with next to no discussion of very interesting aspects of unions, and what may be lost with their decline. 3. K and W offer little discussion of labor supply age, race, education, sex, and in particular, changing role of women in the labor force, 4. Mention of human capital very limited. Discussion in lecture focusing on: 1. Neoclassical theory 2. Women in the Labor Force 3. The Good and the Bad of Unions 4. Aspects of Human Capital if there’s time; r ead relevant pages in chapter 9 on present value: pp. 239-43. 56
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1. NEOCLASSICAL THEORY…. DEMAND FOR LABOR Brief comments on Marginal Productivity theory….stems from Total Product and Marginal Product curve discussion from chapter 12 (pp. 304- 309) W S (assuming a competitive labor market) D (which = MP l x MR) Labor Some technical points: If a firm hires a relatively small number of workers in the total labor market, it takes the market wage as given (just as a producer takes the price as given in a competitive market). Otherwise, the demand for labor (D) will be less for any given wage…that is, with a downward sloping product demand curve, MR < P. Main points: 1. employment = f( wage, amount of capital, and productivity of labor) 2. theory omits any other factor which might influence labor productivity, e.g., the environment, management relations, impact of unions… 57
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2. SUPPLY, AND BACKWARD BENDING SUPPLY CURVE Brief discussion, including the notion of the backward bending curve….issues here is the income and substitution effects from a change in
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econ 1 lecture 8 - LABOR Krugman and Wells devoted mostly...

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