psoas oD (evieig Best 7] Reservation wage] To work on nol to work? that faeons motivate & person -fo enten “lke labouy Fon ce 9 2 To Nlushate pre norhure f ure work decision, we need to consider poure’ inst. ; DS Wyigh Le otPa porson chooses ot +o worvk, at all) she cr Main athe endovoment point € and gets Us units utility hous his non-taloourr Income:_& — wHawoer, tha b person can obil| choose “fo “enters the labour ; market at lke lowest voaye and cell ff some of Kis jeisure “time. $0, the decision Of whether to work or not boils dean -to simple quustion> ‘ Avo the teams & trate sufficiently attractive -to bribe him ‘into entering ie labours market. Yeoms f trade UF anf | ape oes “Conouinption OF BI @ ‘mer (agure mee. ar, parson’ gag @ rote 1s * One above Figures te and the rondyet, tne is GE and initial ai Wp 4s n get maximum ably by eying * Uo. «sf sf he ata movet for’ Fo te nq srt exanple he would be x pint), he would be worse a& as f jibe igo a lqwere TO gohich 3s Ug: so at [gg yt he ween@ a e Hf wago nate is “igh ylken fae budget Mine is HE» M point Ys The worker qels Uy whi lity - Sv, atthe tongo [gah uorkor is been ff. tnd chooses o(enfen Tie maehal) + 08 WE olate tus budget Une from hyo" highs we will gek a tage nate [05] FeJuchere Ane! wonken % indifferent fo work er not to work. his wage vate: is called, Reservation wage « o Tf, market woagec yerenvation Wage } ata person usilP Mok bork, OF all. ,, af, marfeot usage’) reservation wage ss — the ere wil] entore the labours marsket, Therefore, “tre doasion to work is based on The eammparison’ sane ° market ange che Resonvation woe .Market wage —» Hove much 2mployares one willing to PA tor an hour of work Reservation wage—> Horo much tha wonkers requires 4p be bribed into working fore an hour Foview Ques: 03,06] fh| « Markel wage —9 Too much employers ova willing 4094 | -forr an hour éf warm resepration eeage—> Haw much [he amnken nequires Ho be bribed into working for an how 4 a | Gy The laloawo Supply Curves © « Loboura Sepply eunve chaos th relationship befeces ny | ke wage nate and houns of work. e Wo can use he blip mani en eation fam eusorak, {0 eunvo foro every “person inthe donive a labour- ouppyy evonony| 5 curve for’ a> urprekare> Qe can denive a Labor supply@) Conewmption loundle (8) ttouvs & . ond ouage rae relationship we aan sae, from Figure C4); S at wages below reservation wage (& = #2) he person does not ooo’ S at wages highto than “he vesepvation O2ge (65 =410) , the person ente from Figure ), | onthe upwond- sloping segment & SL curve ‘mmplies drat gubstthution effects are shongere initially « ys the abouts market:@ eae baekwoand- “binding segment venplies Sh : intome effects ren dominate evertwall4 wher @ Subeitituhon effects aan no longers ex\et.[T short Qusston]. Adjustment Costs oe modal of Dp assures Pact fina instarsy octjust wie empl mnt Laka dae eepnomice anvinbninent changes.” + Rut it is cost fon a finm-o make rick, changes which wishes to adjust the ize e {s'voorrkfones . V oof ‘a firm loys at a lange humber’ workers br wishes “to expand empe’, Sf Tet eunttat npy / | incur sifbstantial (ona ) east HP Theo “tna fram inewn, ag) stop dikforred », Are called i aq expanditures dust qa cine of tth Adjuetmint tosis? MZ AL and yatead eet Dp| + Too types fF acjustrunt costs: S Voniable Adjustment costs S fixed " = “* Variable adjustment Costs pend on tae Rumbers voorders rat the Pim i is » ding | to hire on tire. S Fixed, adjustment ‘oste eens depend *EA Variable adjustment Costse e, yeise Qt an ineveasiog va rate. at. “Govt: spoiey Aries +o prevent ‘fiems rom Fring, workers, cain zal) Gee easbf trimming ffi g So wkfonce,;.4tl) st by ae; in mn eng ent faster tran the costs oF expanding Ah fim. i$ ic Af Tanith@ e oneourages “(ne -fiams to adjust the tone grt \evel SI lovol4 . tty 2 Prams? volhich, /oat amplogment:, ike, rnay oceur trachon cf workers. sot{ oa gut than The expansion! too more rapidly “fran Ane con Fixed Adjust mont Cole «°° at atom instantly mma Koss in is employ ment, se finrn uatl] incu ainount 6 “adjust mart st - © Fun, the fin has ho, options ® cur rant emp ny ene np a Prxed UTt can remain at tS. = lowe) . 54 Can adust HS amply Yrent level. ‘Capital - Skil) Gm plementary H pthosisS * Ht states -that Prysical capital is more Complementarat to ekiled labow,.than +o Unskilled labor . ‘> + _ = ° Unskilled labor § Capital —> Subsitutes Skilled -laloow Capital Complements ° Bye ifthe. price. of itapital falls, Ht empl yors: increase «tate Use. e, capital equipment,'etohidn rises ae demand -fors skilled workers. Because, te are erp Lat Tegetron) Eee A , use a Demand fr dr (i capital ¥ 7 ptiah tor: sled toons | f9,,Tris is pe : Pit : as cptlalesitn: At. nolf « mn gel ¥ VAs 4h ish SH tewibh nas sre@ + Fy suggests : gests mat, subsidies fo investments in prion) Gpital will have oa different impact on different grep & workers. (Anvestmant tou Credit) » Snvestrent -toe Credit Pamand Priv Of Demand -br Demand for Copia ‘i Gpital 1 unaatiel swing , atta? spwostmant “tee credit accelerates « Se, wvestwen on the eeonemy, bat alsn woorsens copnomic conditions fon less @ killed ooor/ kor. ptnesis aloo suggests thot Fechnolegica| «The ap \mnpact : Peogass can wave A consi denable on Income imequal hocause ire « Demand ton skilled workers [ SS Pornand hw unskilled vows kes 5Db Chapter-4 ' 6 Dead weight loss’: A payroll tan is a percenstag 2 withheld from A voowker's Pra kg a Born who pay it to dno get on te worken's behalf. «Payroll taxes ineredse: lhe cost & hiving a Coobkon ; $0 thork the tales reduces otal employment ol we can. illustrat 2 two graphs to desenibe nc 0L:*(a) > In a Competitive equ’, vohere & workens ara hired ot a wage & o- * The ota) gains from trade "= Produter Surplus + worker surplus = rs) (> Te pay Poll stop reduees the ampt [eval © fo Gy eaises: tive, cost of rehng erordkers fo Ootn vated wees xe wonkan’s take-home ry to Wek * : 50, p* a5 Producers Suinplus oy —, Worker Sunplas ; a oie sax revenues DL 5 Net toss-to seeiety / Poad weight tose | % $0, 4he total gains from trade = Poodureer supplus + Worder Surplust faye rover = ee +r +T) { /+ $0,the Imposition sf Pryrell tax reduces tne lal gains fom trade, tohich is =(Pt§)-OL = pt tet 4r, » Tis DL measures no Re of gains: toogone, becawe -he tax forces am ployeras sto eat Gr 2) ; us employment foclow he Afficient leva) . * Tre Db drises bocause the tox preverts some voowkens who; juera willing 4p wok, fiom beings hired by emplyens ,tohe jeere wll ing sto hire two.Os homignettion | sumpluss I ' een © Tones bgt ans thé num . mMmiyration Surplus me & imam grant lsowkans ave arisen 7 he native labore masket which detorm iS Te Nabor market ap. * Mare are tuo types F impact oF "rn gration: i (al p when Vanni grants ‘and’ natives . are “pete culosti bites : By tolLen “immigrant Gnd natives are coreplements aside oh pri ap jini} grants and natives ome porte substitutes means, thy hove “ne Same Types of skills and ave cormpeting- oe ste Same types € qjobs .& Tw situation fy the. labor market afters immigrants entero shes marek can, be. illushated « vot sup Pld = We J | Wl tab Dornand ot N,N ae Grnplog mere 0 Ig J \ Here, immi grants, shitts out the supply cumve- YAS a yesult, tre wage falls trom , to 4 and empt “tnonenses Irom N, +o Nz: v avin game Ate ,) at the “towers wage, tha nurmbera native workers declines from Noto Nit ‘because the naive worden: think that it is ‘Ro longer caopth while sto work.S sda \inmi grants and nective wore” —_\ OY2 Somplaments: moans that tree, not Laoor et “Orpen \n the sare noreasd , STF the numbers ¢ immigrant 1 He Yoses +o MP & natives, eigirey up nue du mand ourye, tore native bor i hs woowkens., This can be shown A n rer poy Suh Ww) Wo Damand P No Ny Erp 2% Pee figure shows that tne Inerdase in native mductivity raises the native wag & from wu, to WA |\ Posides, Some natives who previ ously did not- find potitoble slo work, novo See 4c hight were rale and toy to enter tre tabove marcel , - \ So, native erly noe rises Prom Not Nt The correlation beta _befwatin hy immigrants and natives * is dren vee amall Tae evidence suggests -tnat iynrigras 500M not to have mueh Impact on the labore market “ opportunities ¢- native, weakens.Sh Chapter Oss ® Lom ensaling waa idifferorntialé * T+ qwico “to compeneatte wo or kers fore “Ine Non wege charactenishes & jobs. condi tor’ (such as unpleasant coonkingy Pishy ‘pbs ete.) “Defined as che additional “amount income fered to a ‘worker fo motivate whe +f seep a an undesinabe ea} mpleant ‘sob. co fhe ature ¢° Labbe Pranteet! eg in presence ff compensating wage differentials differ trom se Typical demand- supply -frarneusordk + Workers have different prefopences and firms ffen different rooming conditionsilth teeory Helle a story F how workers & foms “maleh and male” in -~we labors marker. tH also analyzes one & re central qustion & labor eeoivmics . * — what factors. determine w001g2 differentials oer worksns 7 + ty labow manket , Sore “jobs “fen & bompletely cae ervivanrnait and the probability muy in these yobs F Oo ‘onthe ower hand; some obs ew “bey anviponment and tne rev ff geting ined in those fobs = have higher | wy the worker +The wiskier Jobs should stron tre sofa pbs - Because, s will be ‘ind Hlerent if the wage ynerease | very tow fow the riskier jobs.drain This can be shown by. Figure: 5 wade ro ba bi lig at Tmyye Hert, qe workers auld preferr He wkjer % id. yb, if That job are a rvoage, much. more J tran wy, vohi Js * t additional Income which he tworkere PS paid r% dhe Chompens ating Wwog differentials, Compensating woge differentials shows 4heve are only two types of fous ‘tered by onby ‘tev “ypes fF firms . % safe jobs ; & ish obs + Now) Suppose, there ave many types F yeh $ stl) cme prosbillg : ae an the: 7b vu is. 0 and 4. a, completely “fi xe 4— ping injuved ty @ inevitable Indifference curve ® sale ae W2' know different inom have different preferences ctor vist, But avtwkens.djslike aah i ag dislike wi atfecaat we assumertnat »Uy . Pouradility €°S + he indifference carves for, three: 4 workers A, 6,2 (Ya. Up, YO + | S worlkon A is very “risk - avertar Su oven B is in intermediate ' postion 14, worker 7 does not ning nisk very much, 1 Ba elope & sash 1h difference ewrve-(1C) tells us how much’ e0age ugould have 4s increase if he parti ualoire worken “ere, aes shghity rbkieb SP voluntarily. ve tra pesenvattan|, « Sy, the slope fan IC qrice ok a woniken “to move “to a sligittey nickle “job.~Hene, —> coorken A has ste highest vnesenvation pee fr tals / — worker Q has che jettenm ed ite 5 uprken ¢ has tre lowest Asoprwofit eunvet SEES lensing ows cored “fers fase usorikers’ by fering different pe packages (“toage’teisk) + ms choose , vohich hype nud anpeit curve * TD show how “Ke _ environment to Klan wo Because, tre isopnete curve gives al) the woge- isk, exmbinetions which ged ra Sarre ly, pots. of | Probability =r sjury.eas itis contyy ty product caety + a tinm fering wis level gr can vohan make bro eworeplace soteye only TE vedmers Jyoges. Waclag TO ZatTd, veisk oo eo Bar fiam wo phir workplan ew aT ger ter URE ze, BART Teopesfit eutve upwond shping - » # lower isoprotit cunves yield highe pot Gpilibrium] hedonié v0 0 tunt § * Now diferent wworkon 8 “have: diferent 3 Ts and differen tioms “have different isaprofit- curves, We ean “draw eau” pooh fon h aoe poo ftom. us at) The er And dishke eis, chooses A bohach. find it easy 4p provide a safe environ 'wl And worrkens who do not mind wisk as much chooses the: eens which find it oe +o finn 2) provide a we environment. This velationship between wang and Spb ig, called a Foie wage fant charactenistiesTh wage. schtoling locnss . wong e- schooling locus gives Ke salarr teak 0 partatarn worker could earn if he torplated a prateular level of schoolig- *Wege-schooting locus has three’ important properties: dD Me meige. ~ schooling locus is upevand eae ae ao aber educator » OIA" ws etr intome- é %. ~ To attract educated workers, {v2 Amplogers must compensate those voortkers with Wigher calara 2D) Tne slope F tre wWst tells as, by how much a worken's wage would inevease if he wore to obtain ond more yea” schooli 4 ‘en Certain level, L Each extra gears 5) The WSL is Concave, is schooling generates less neremunt knowled ge and lswen additional earnings than previous years: port WI Ws gears A Schooling