LABOR ECONOMICS
8th Edition
ISBN: 9781260004724
Author: BORJAS
Publisher: RENT MCG
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Chapter 12, Problem 6P
To determine
Explain why the
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Compare two unemployed workers: one is 25 years old while the other is 55 years old. Both workers have similar skills and face the same wage offer distribution. Suppose that both workers also incur similar search costs. Which worker will have a higher asking wage? Why? Can search theory explain why the unemployment rate of young workers differs from that of older workers?
Suppose there is an increase in total factor productivity, which implies that all firms offer higher wages. In the one-sided search model of unemployment, determine the effects of this on the reservation wage and on the longrun unemployment rate. Explain your results.
Suppose the government wants to reduce this type of unemployment. Which of the following policies would help achieve this goal? Check all that apply.
Extending the number of weeks for which unemployed workers are eligible for unemployment insurance benefits from the government
Offering recipients of unemployment insurance benefits a cash bonus if they find a new job within a specified number of weeks
Establishing government-run employment agencies to connect unemployed workers to job vacancies
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- Consider the job search behavior of an unemployed worker. There is a wage offer distribution, which is known to the unemployed worker. The unemployed worker draws one wage offer from that distribution each period and decides whether to accept or reject the offer. If she accepts, she is employed forever at that wage. If she rejects, she receives a fixed amount of unemployment insurance and draws another offer next period. Characterize and explain how the asking (or reservation) wage is determined. [Hint: Use a diagram and plot marginal cost of search versus the marginal revenue from search.] THE ANSWER SHOULD BE VERY CLEAR AND DETAİLED, THANK YOU!!!arrow_forwardWhich of the following combinations would increase unemployment in an economy? Select one: a) High interest rate, low taxes b) Low interest rate, high taxes c) Low interest rate, low government spending d) High interest rate, low government spending e) Low interest rate, low taxesarrow_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_forward
- I WANT ONLY PART 2 AND PART 3 THANK YOU!!! Consider the job search behavior of an unemployed worker. There is a wage offer distribution, which is known to the unemployed worker. The unemployed worker draws one wage offer from that distribution each period and decides whether to accept or reject the offer. If she accepts, she is employed forever at that wage. If she rejects, she receives a fixed amount of unemployment insurance and draws another offer next period. Characterize and explain how the asking (or reservation) wage is determined. [Hint: Use a diagram and plot marginal cost of search versus the marginal revenue from search.] (I SOLVED THİS PART) How would the asking wage in question B.1 change if the unemployment insurance payment is increased by the government? Now suppose that, after accepting an offer and becoming employed, the worker can be fired from her job with a fixed probability each period. How would the asking wage in question B.1 change? The…arrow_forwardReducing occupational immobility of labor is the only way of decreasing the level of unemployment. Discussarrow_forwardSuppose the Palestinian population is 3,800,000 individuals, the number of individuals 16 years and above (manpower) is 2,000,000. Given that the labor force participation rate is 80% and unemployment rate is 16%.arrow_forward
- Suppose the civilian noninstitutionalized working-age population is 35.935.9 million in in a hypothetical economy. Of these, 4.94.9 million are working part-time and 14.5314.53 million are working full-time. Assume the Bureau of Labor Statistics (BLS) definitions are used for calculating unemployment data. Among those not working, the most recent job-search activity for 2.902.90 million happened less than two weeks ago, while 1.721.72 million most recently looked for work between two and four weeks ago. An additional 0.860.86 million most recently looked for work five weeks ago, and the remaining 10.9910.99 million who do not have jobs have not looked for work in the past six weeks. Round your answers to two decimal places. What is the size of the total labor force? ____millionmillion How many people are unemployed? ______millionmillion What is the labor force participation rate? _____% What is the unemployment rate? _______%arrow_forwardWhen unemployment exists in the supply and demand labor market model, there is an adjustment that brings the model back into equilibrium—back to full employment. Orthodox economists cite two mechanisms that cause the adjustment. Explain each of these.arrow_forwardQ. 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 12arrow_forward
- Does the existence of unemployment insurance eliminate the economic costs of unemployment?arrow_forwardIf unemployment is above the natural rate of unemployment, then potential GDP is: A) Equal to actual GDP B) Greater than actual GDP C) Equal to the GDP gap D) Less than actual GDParrow_forwardDescribe the relationship between the size of the employment rent and (i) the expected duration of unemployment (ii) the size of the unemployment benefit per hour and (iii) the size of the psychological cost of unemployment per hour.arrow_forward
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