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wage distributions

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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i need part D and E

Search frictions and the gender gap. Consider the following version of the search model of the labor market by Burdett and Mortensen (1998). There are two labor markets, one for men (m) and one for women (f). On one side of the m labor market, there is a continuum of male workers with measure 1. Each worker has preferences described by the lifetime utility E B*c4, where 3 denotes the worker's discount factor and c denotes the worker's consumption in period t, which is equal to b if the worker is unemployed and w if the worker is employed. On the other side of the m labor market, there is a continuum of firms. Each firm maximizes the present value of profits discounted at the factor 3. Assume 3 = 1. Workers and firms come together through a decentralized process of search. In particular, a worker finds a firm with probability A when unemployed and A" when employed. Assume X = X" = Am. When a worker meets a firm, it observes the wage of the firm and decides whether to join the firm or not. If he does, he produces y units of output per period until he 2. either finds a better job or he is forced into unemployment (an event which happens with probability ổ per period). The labor market f is the same as the labor market m, except that X = x = x, with dg < Am- Write down and compare the reservation wage for men, Rm, and for women, Rf. Discuss your findings. a. b. Write down the equilibrium wage offer distributions Fm(w) and F;(w) in the labor markets m and f. Compute the difference between F,(w) and F;(w). What does the sign of the difference tell you about the wages offered to men and women? Write down the equilibrium wage distributions G„(w) and Gj(w) in the labor markets m and f. Which is greater: G„(w) or Gj(w)? And what does this say about the wages earned by men and women? d.. Imagine that a no-discrimination law is introduced by Congress, forcing firms to offer the same wages to women as to men, i.e. F;(w) = Fm(w). Compute the wage distributions Gm(w) and Gf(w) for men and women. Are they equal? Explain your findings. Did the no-discrimination policy succeed in reducing gender inequality? е.
Transcribed Image Text:Search frictions and the gender gap. Consider the following version of the search model of the labor market by Burdett and Mortensen (1998). There are two labor markets, one for men (m) and one for women (f). On one side of the m labor market, there is a continuum of male workers with measure 1. Each worker has preferences described by the lifetime utility E B*c4, where 3 denotes the worker's discount factor and c denotes the worker's consumption in period t, which is equal to b if the worker is unemployed and w if the worker is employed. On the other side of the m labor market, there is a continuum of firms. Each firm maximizes the present value of profits discounted at the factor 3. Assume 3 = 1. Workers and firms come together through a decentralized process of search. In particular, a worker finds a firm with probability A when unemployed and A" when employed. Assume X = X" = Am. When a worker meets a firm, it observes the wage of the firm and decides whether to join the firm or not. If he does, he produces y units of output per period until he 2. either finds a better job or he is forced into unemployment (an event which happens with probability ổ per period). The labor market f is the same as the labor market m, except that X = x = x, with dg < Am- Write down and compare the reservation wage for men, Rm, and for women, Rf. Discuss your findings. a. b. Write down the equilibrium wage offer distributions Fm(w) and F;(w) in the labor markets m and f. Compute the difference between F,(w) and F;(w). What does the sign of the difference tell you about the wages offered to men and women? Write down the equilibrium wage distributions G„(w) and Gj(w) in the labor markets m and f. Which is greater: G„(w) or Gj(w)? And what does this say about the wages earned by men and women? d.. Imagine that a no-discrimination law is introduced by Congress, forcing firms to offer the same wages to women as to men, i.e. F;(w) = Fm(w). Compute the wage distributions Gm(w) and Gf(w) for men and women. Are they equal? Explain your findings. Did the no-discrimination policy succeed in reducing gender inequality? е.
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