19 Book Notes – Econ 201

19 Book Notes – Econ 201 - 19 Book Notes –...

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Unformatted text preview: 19 Book Notes – Econ 201 Compensating Differential: A difference in wages that arises to offset the nonmonetary characteristics of different jobs Human Capital: The accumulation of investments in people, such as education and on-the-job training Most important Human Capital Education Workers with more human capital earn more than those with less human capital Firms are willing to pay more for the highly educated because they have a higher marginal product Workers are willing to pay the cost of becoming educated if there is a reward for doing so. The rich get richer and the poor get poorer. Natural Ability is important for workers in all occupations. Effort is an important characteristic in worker’s pay Chance also plays a role in determining wages you spend all your time learning how to do something that no one needs! It is difficult to measure ability, effort and chance, but it is safe to say that they are important in determining wages. Beauty Pays. Sometimes employers interpret a college degree as high-ability Signaling of Education I spent all this money on college so I must have a high ability....
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This note was uploaded on 10/13/2011 for the course EC 201 taught by Professor Haider during the Spring '10 term at Michigan State University.

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19 Book Notes – Econ 201 - 19 Book Notes –...

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