LABOR MARKETS Downloaded by Vicky Gupta vk842302gmailcom lOMoARcPSD3929542

Labor markets downloaded by vicky gupta

This preview shows page 12 - 16 out of 52 pages.

LABOR MARKETS Downloaded by Vicky Gupta ([email protected]) lOMoARcPSD|3929542
Image of page 12

Subscribe to view the full document.

Classical model Assumptions One period model (causal = permanent workers) No distinction between labor power & laborers No involuntary unemployment No uncertainty Work capacity of workers is given & labor supply determined by relative benefits and costs of (labor) income and leisure. Capacity curve ------------------------------------------------------------------------ W*: equilibrium wage: reach income you need for ok nutrition. Labor supply curve: Income affects work capacity and work capacity affects income. Suppose individual maximizes income – labor supply jumps discontinuously at a wage that can support required work capacity. V angle denotes a wage. V4 is low as it only supports D. You can only jump to C by V3. As wage increases from V4 to V1, at V3 you gt a discontinuous jump in labor supply. Same at the aggregate level if all are the same. Labor market equilibrium Downloaded by Vicky Gupta ([email protected]) lOMoARcPSD|3929542
Image of page 13
Standard situation – everyone is healthy Market clears wage at v3, but demand and labor supply is determined by is not enough to make everyone be at leisure income trade off. the healthy side. Degree to where society stands is determined by non-labor assets and labor market. If some people have other sources of income which can help them achieve their healthy state, they can achieve more income with lower work capacity Since rich person has non-labor income R2, they work hard at v2. R1 has less NL income, and therefore requires higher income for same capacity Minimum piece rate for work Giving people more land, shifts work capacity supply (demand curve) to the left because they have more non-labor income (and giving more land incr their NL income). People in supply curve, thus giving the land to others, causes supply curve to shift to the right (bc they need to compensate for non-labor income). CHILD LABOR – UDRY (2003) What is child labor? Laborer: 5-11 years: economically active (> 1 hrs) 12-14 years: < 14 hrs (non-hazardous work; >1 hr hazardous) Child works on a regular basis for which he/she is paid ° Where do most child laborers work? Agriculture ° Industry with most injuries per 100 children: Construction ° What can be done about child labor? ° Most child labor in Africa. Then comes Oceania, Asia, and Latin America. Downloaded by Vicky Gupta ([email protected]) lOMoARcPSD|3929542
Image of page 14

Subscribe to view the full document.

° Child labor and poverty Participation rates of children in the workforce are decreasing Child labor is related to poverty – but mostly to econ opportunities Child labor is largely an econ decision of the household Child labor sacrifices future welfare of child in exchange for current benefit for household ° Dynastic trap: vicious circle (Udry) – not socially efficient ° Financial markets imperfect: people underinvest in education trade off between sending children to school vs letting them work capital market is not working bc they don’t have enough money to invest and so would have to borrow. But banks are not willing to lend against future income of children. Contradicts vs society benefit of investing in education
Image of page 15
Image of page 16
  • Fall '18

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Ask Expert Tutors You can ask 0 bonus questions You can ask 0 questions (0 expire soon) You can ask 0 questions (will expire )
Answers in as fast as 15 minutes