Ch. 19&20 Earnings - Poverty

Ch. 19&20 Earnings - Poverty - Chapters 19 and 20...

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Chapters 19 and 20 Earnings and Discrimination Income Inequality and Poverty
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Introductory notes: Interesting topics for both economists and non-economists Why are some people poor and others rich? Can we “cure” poverty and make society better off as a result?
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Intro continued For economists Main issue is efficiency do markets work well? Or do they “fail” to allocate resources to the best possible uses? Application of conceptual models Empirical studies For non-economists, the issue of “fairness” and equity is paramount For policy-makers, the important question is what can be done to effectively address inequality with minimal effect on efficiency?
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Chapter 19 Various sources of wage differences o Compensating differentials o Ability and Effort o Chance (luck) o Different product markets o Human Capital o Discrimination
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Compensating Differentials Non-monetary aspects of work differ between occupations and employers o Quality of in-kind benefits? o Risks? o Psychological rewards? Higher wages necessary as incentive to induce people to take on less desirable jobs, to compensate for higher opportunity cost
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Wage Quantity D S 2 S 1 B A W 2 W 1 Q 1 Q 2 Different Willingness to Supply
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Ability and Effort “People who work harder should get paid more.” True, but…. Differences in natural abilities influence relative productivity o How easy is it for you to explain things to others? o How fast does it take you to figure things out? o Are you physically deft? Strong? o Mathematically inclined?
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Wage Quantity D 1 D 2 S B A W 2 W 1 Q 1 Q 2 Difference in Productivity due to Natural Ability and/or Effort
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Chance “Just lucky to be in the right place at the right time” “Hindsight is better than foresight” “Some things are just not within your control” “Not everything in life can be explained”
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Wage Quantity C D lower_price D higher_price S scarce A B S abundnant Differences in Both Supply and Demand D
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This note was uploaded on 12/30/2011 for the course ECON Econ 200 taught by Professor Clement during the Fall '11 term at Maryland.

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Ch. 19&20 Earnings - Poverty - Chapters 19 and 20...

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