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# a) The Targeted Jobs Tax Credit (TJTC) existed from 1979 through 1994. It offered employers a tax credit for each &quot;less-skilled&amp;quot; worker...

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a) The Targeted Jobs Tax Credit (TJTC) existed from 1979 through 1994. It offered employers a tax credit for each “less-skilled&quot; worker they employed. Assume that the tax credit was ﬁxed at \$5 per-
hour-worked by a less-skilled worker. According to neoclassical theoly, how should this tax credit have affected the labor demand curve for less-skilled workers? What are the predicted effects on
wages and employment? How does the share of the credit captured by workers versus employers, and
the employment level, depend on the elasticities of the labor supply and labor demand curves? You
will need graphs in your answer. b) The Family and Medical Leave Act 0}”1993 (Fm) guaranteed maternity leave to many working
women across the US. However, the law only applied to ﬁrms with 50-or-more employees;
employees of smaller ﬁrms were not covered by the Fm. Suppose that providing maternity leave
costs ﬁrms \$5 per-hour for each female employee and that women value the beneﬁt at \$3 per-hour.
Graphically show the predicted wage and employment eﬁ'ects of the law according to neoclassical
theory. How do the predictions change if women value the beneﬁt at \$5 per-hour? c) Suppose you want to test whether the 1993 FMLA actually aﬂ'ected the wages of female workers.
Assume you have data on the wages, gender, ﬁrm size, and other characteristics (age, education, race,
ethnicity, etc.) of workers for the years 1990 to 1997. Describe a research design that would allow
you to estimate the law‘s impact. Be sure to deﬁne your treatment and control groups and describe
how you would estimate the effect. Suppose that women and men are substitutable in most jobs
regardless of a ﬁrm’s size. How does this affect, if at all, the validity of your control group(s) and the
interpretation of your ﬁndings? (There is no deﬁnitively correct answer here. Think about what can
happen as a result of an adjusting labor market equilibrium.)

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