LABOR ECONOMICS
8th Edition
ISBN: 9781260004724
Author: BORJAS
Publisher: RENT MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 12, Problem 15P
(a)
To determine
Explain why asking wages and expected
(b)
To determine
Explain whether the standard job search model explains the unemployment duration is longer or not.
(c)
To determine
Explain the effect of the equilibrium unemployment rate.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Q. 12-15. Consider the standard job search model as described in the text.
(a) Why are the asking wage and expected unemployment duration positively related?
(b) Can the standard job search model explain why unemployment duration is longer, on average, for secondary workers when compared to primary workers? Discuss.
(c) In the context of the standard search model, explain how the economy-wide average asking wage and unemployment duration are affected by an expanded underground (cash) economy. What is the effect on the equilibrium unemployment rate?
BOOK: Labor Economics, 8th Edition, by George Borjas, published by McGraw-Hill. Chapter 12
The bathtub model of unemployment revisited - Lt is the labor force, Ut is the number of unemployed workers and Et the number of employed workers in period t. The separation rate and the job finding rate in period t are correspondingly st and ft. Assume that Lt+1 = (1 + n) Lt and a share dt of the new workers, Lt+1 Lt, are employed immediately as they enter the labor force.
Write and explain the equation describing the level of unemployment in period t + 1, Ut+1; as a function of current unemployment, Ut, current employment, Et, and increase in the labor force, Lt+1 L
3. a. Provide a definition for the natural rate of unemployment. How is your definition related to the potential output?
b. What are different unemployment categories that are included in the natural level of unemployment? Provide at least one example for each category
Knowledge Booster
Similar questions
- Explain whether each of the following changes in the composition of the labor force is likely toaffect frictional or structural unemployment and increase or decrease the measured natural rate ofunemployment.(a) A “baby boom” causes an increase in the share of young workers (age 16–24) as a percentageof the labor force. (b) A loosening of federal restrictions on eligibility for disability benefits leads to an increase inthe number of people receiving disability paymentsarrow_forwardWhat is demand-deficient unemployment? a) Unemployment due to asymmetric information on the side of the employees. b) Unemployment due to skill mismatch between supply and demand of labour. c) Unemployment due to asymmetric information on the side of the employers. d) Unemployment due to insufficient demand in the economy to maintain full employment.arrow_forwardOut of all types of unemployment , which type of unemplyment has increased the most with the covid lockdown(s) ? Explain briefly why that is?arrow_forward
- Suppose that the markup of goods prices over marginal cost is 6%, and that the wage-setting equation is W=P(1-u) where u is the unemployment rate. a. What is the real wage, as determined by the price-setting equation? b. What is the natural rate of unemployment? c. Suppose that the markup of prices over costs increases to 11%. What happens to the natural rate of unemployment?arrow_forwardThe figure describes the effect of immigration on unemployment in the labour market. The labour market equilibrium is at A and C before and after the influx of immigration, respectively. Based on this figure, which of the following statements is correct? Real wage 40 20 3 3 Wage-setting curve (before immigration) B Wage-setting curve (after) immigration) Labour force (before Immigration) Price- setting curve Labour force (after immigration) 4 4.5 5 5.5 Employment, millions of workers 6 Firms claim a higher markup in the new equilibrium. The unemployment rate is unchanged in the new equilibrium. All incumbent workers are no worse off in the new equilibrium. All incumbent workers are unaffected while the labour market adjusts.arrow_forwardGive the equation used to calculate the unemployment rate. State the different types ofunemployment. In your opinion, which type is the most problematic one? Justify your answer.arrow_forward
- In a study of the determinants of regional unemployment rates using pooled cross sections, the coefficients of the year dummies may reveal: Your answer: O there is no economic information that can be retrieved from these coefficients. O regional effects, which affect all cities equally, as long as they are a member of that region. O attitude differences towards unemployment between regions. macroeconomic effects, which affect all regions equally in a given year.arrow_forwarda) What is structural and frictional unemployment? b) Give a real world example of frictional and structural unemployment in Trinidad and Tobago between.arrow_forwardSuppose that Congress or your country's Legislature passes legislation making it more difficult for firms to fire workers during this COVID-19 period. (An example is a law requiring severance pay for fired workers.) If this legislation reduces the rate of job separation without affecting the rate of job finding, how would the natural rate of unemployment change? Do you think that it is plausible that the legislation would not affect the rate of job finding? Why or why not?arrow_forward
- Which of the following statements is incorrect? a. A decrease in the labor participation can make the unemployment rate decline. b. When the BLS puts out Employment Situation report each month, it also provides the results about employment, hours worked, and employee earnings from Establishment Survey. c. Every month, the BLS computes the unemployment rate based on a survey of about 60,000 households (Current Population Survey). d. The broadest measure of labor underutilization, known as u6, is the sum of total unemployed, marginally attached workers, and part time workers for economic reasons as a percent of the civilian labor force. e. None of the above are incorrect.arrow_forwardConsider a hypothetical economy in which the labor force consists of 300 people. Of those, 270 people are employed full-time and 30 people are unemployed. The economy follows the same conventions as the U.S. Bureau of Labor Statistics (BLS) in computing its employment figures. Therefore, Initially the unemployment rate is calculated as follows: Unemployment Rate = Manber of played ople Number of Popie Labor Fore 30 x 100 300 <= 10% W x 100 Suppose a reduction in foreign demand for this economy's products causes an economic recession following table offers two possible scenarios resulting from the recession. Calculate the unemployment rate associated with each scenario in the following table. Assume that each scenario describes the only labor market changes in this economy. Scenario A: Firms reduce work hours by 10%. The number of involuntary part-time workers rises as firms respond to the reduction in the demand for their products by reducing the hours of each employed person from 40…arrow_forwardDescribe in detail the household survey of unemployment and, in the context of the survey, explain what is meant the terms below and give the number or rate of each based on the table below for the following dates-- December 2007; June 2009; and February 2020, Arpil 2020, May 2020, and January 2021: employed unemployed not in the labor force the unemployment rate the labor force participation rate the employment rate (employment -population ratio) if the answer for 'e' in December 2007 were the same as in February 2020 and the number of employed in February 2020 remained the same at 158,759,000, how many people would be unemployed in February 2020 and what, therefore, would the unemployment rate be in February 2020? December 2007 June 2009 February 2020 April 2020 May 2020 January 2021 Civilian noninstitutional population >16 233,290,000 235,695,000 259,835,000 260,045,000 260,197,000 260,849,000 Civilian labor force 153,918,000…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc
Economics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Microeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506893Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Microeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning