S h fertility level ml fertility e0 w0 1mhs 1ml s e1

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Unformatted text preview: there is no demand for adult labour child γwa = wc ⇒ the firm is indifferent between adult labour and child labour Market clearing condition Market – – Demand for adult labour equals supply of adult labour Demand for child labour equals supply of child labour Created by: Dr Sumon Bhaumik http://www.sumonbhaumik.net/ Other impact of social environment [5] Assumption Assumption – γwa = wc wa S l. S h Fertility level = ml Fertility E0 w0 (1+mhβ)s (1+ml β)s E1 w1 E2 w2 Sl N Sh (1+γml)N (1+γmh)N D D Labour supply Labour – If wa > (1 + mlβ)s, only adult If )s, labour labour » Equilibrium at E0 – If wa < (1 + mlβ)s, both adult If )s, and child labour and » Equilibrium at E1 Fertility level increases to mh – Multiple equilibria at E0 and E2 Multiple equilibria Created by: Dr Sumon Bhaumik http://www.sumonbhaumik.net/ Other impact of social environment [6] Equilibrium E0 Equilibrium – Wage = w0 – c(ml) = w0/(1 + mlβ) > w0/(1 + mhβ) = c(mh) c(m – Only low fertility equilibrium is possible Equilibrium E1 Equilibrium – Adult wage = w1; Child’s wage = γw1 wage – c(ml) = w1(1 + ml γ)/(1 + mlβ) < w1(1 + mhγ)/(1 + mhβ) = c(mh) )/(1 (1 )/(1 c(m » A child is a net contributor to the family’s welfare: γ > β welfare: – Low fertility equilibrium is not possible Equilibrium E2 Equilibrium – Adult wage = w2; Child’s wage = γw2 wage – c(ml) = w1(1 + ml γ)/(1 + mlβ) < w2(1 + mhγ)/(1 + mhβ) = c(mh) )/(1 (1 )/(1 c(m – Only high fertility equilibrium is possible Created by: Dr Sumon Bhaumik http://www.sumonbhaumik.net/...
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This note was uploaded on 10/05/2013 for the course ECON 455 taught by Professor Sumonbhaumik during the Fall '11 term at Simon Fraser.

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