ECON4715-2014H.pdf - UNIVERSITY OF OSLO DEPARTMENT OF...

UNIVERSITY OF OSLO
DEPARTMENT OF ECONOMICS
Exam: ECON4715 – Labor Economics
Date of exam: Thursday, November 27, 2014 Grades are given: December 18, 2014
Time for exam: 09.00 a.m. – 12.00 noon
The problem set covers 6 pages (incl. cover sheet)
Resources allowed:
 No resources allowed (except if you have been granted use of a dictionary from the
Faculty of Social Sciences)
The grades given: A-F, with A as the best and E as the weakest passing grade. F is fail.

Final Exam ECON4715 – Labour economics
This exam has 5 questions, with in total 17 sub-questions.
When answering the questions on the exam you should be brief and to the point!
Make sure to write clearly. Difficult to decipher answers will not be counted!
1. In this question you have to indicate whether you think the statement is true or false
and explain why. You do not get any points if you only state whether the statement
is true or false.
(a) A decline in the importance of unions is expected to increase the skill wage
differential.
(b) Statistical discrimination arises because employers get disutility from hiring
minority workers.
(c) If the rate of return to skills is higher in the source country than in the
destination country, high skilled workers are more likely to migrate to the
destination country than low skilled workers.
(d) Use the information in the following Table that shows the productivity and
cost of schooling for high- and low-productivity workers.
1

2. The theory of compensating wage differentials
(a) Draw two indifference curves in Probability of Injury (x-axis) versus Wage
(y-axis) space, for two individuals where one is more risk averse than the other
but who are otherwise identical (explain the shape of the indifference curves
and which one is which).
(b) Draw an iso-profit curve in Probability of Injury (x-axis) versus Wage (y-axis)
space, and explain its shape.
(c) Illustrate the wage and job characteristics the two workers in (a) will end up
with in equilibrium. Explain the intuition of the outcome.
3. This question is about: Hunt, J. (1999). Has Work-Sharing Worked In Germany?
Quarterly Journal of Economics 114(1). pp. 117-148
Hunt is interested in how a standard hours reduction (contractual number of hours
per week given wages) affects firms’ labor demand.
(a) Suppose that for every hour worked an employee is payed a wage w up to
standard hours h
s
, and overtime wage w
o
= (1 + p ) w > w for hours worked
beyond that. Assume furthermore that there are fixed cost F involved in hiring.