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reaction paper #3

reaction paper #3 - Morgan 1 Cassie Morgan Professor Park...

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Morgan Cassie Morgan Professor Park ECON-200-001 3 April 2008 Reaction Paper #3 In his book Naked Economics , Wheelan argues that adverse selection can explain and justify discrimination both in and out of the workplace. Some of the examples he uses are when a male and female are applying for the same job and the current and future issues of insurance. Adverse selection can be a problem when there is asymmetric information between the seller and the buyer, or in some cases between an interviewer and someone who is applying for the job. When there is adverse selection and asymmetric information, both parties have information that the other party does not know of. In the case with the job, graduates categorize themselves into different job fields based on the personal information about their desired career plans. This information is information that only they, the individual graduate, know about. When a male and female were both applying for a job as an attorney at the same law firm, the firm chose the male candidate even though both candidates had the same credentials. This discrimination against the female is due to the assumed knowledge that the female will want to start a family in the future. The company assumes this information and thinks about the future costs that she will place upon them if she decides to take a paid maternity leave (Wheelan 83). It is not the maternity leave itself that they fear; it is whether or not she will return to the law firm that they fear. If she decides not return to the law firm, then this cost will take a great toll on the firm because they will have paid her for not doing any work for them. This situation actually causes harm to
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