Contemporary Labor Economics
11th Edition
ISBN: 9781259290602
Author: Campbell R. McConnell, Stanley L. Brue, David Macpherson
Publisher: McGraw-Hill Education
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Chapter 2, Problem 13QS
To determine
The payments for disabled and the work–leisure model.
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Suppose a small country called "Mamidas" is experiencing an aging population, leading to an increase in the number of retirees and a decline in the labor force participation rate. As a result, the government decides to implement an antipoverty policy to provide financial support to the elderly population. The policy aims to ensure that retired individuals have a minimum income to cover basic living expenses.
Given the following information:
The total number of retirees in Mamidas is 10,000.
The poverty threshold for retirees is set at $20,000 per year.
The average annual retirement income before the antipoverty policy is $16,000 per retiree.
Calculate the total annual cost of the antipoverty policy for the government of Mamidas.
Assume for this case that all retirees earn the average income.
Senator Deal proposes to offer a choice to future retirees: if you retire before age 70, the benefits are calculated on the last 35 years of income; if you retire at age 73, however, you receive benefits calculated on only the last 15 years of income. Which option will high-income workers likely choose? Low-income workers? Why?
Some part of income inequality is likely to be the result of discrimination. But other factors responsible for inequality include:
Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to
place a check mark. For incorrect answer(s), click the option twice to empty the box.
differences in abilities and talents.
different preferences for work versus leisure.
differences in education and training.
different preferences for low-paying but safe jobs relative to high-paying but dangerous jobs.
Chapter 2 Solutions
Contemporary Labor Economics
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- Suppose that 15 states decrease the length of the standard work week from 40 to 35 hours. You are interested in the effects of this change on worker productivity. What effects might you expect to see? How would you conduct a difference-in-difference analysis to estimate the impact? What assumption must hold for the difference-in-difference analysis to be valid?arrow_forwardPresently, there is a minimum and maximum social security benefit paid to retirees. Between these two bounds, a retiree’s benefit level depends on how much she contributed to the system over her work life. Suppose Social Security was changed so that everyone aged 65 or older was paid $12,000 per year regardless of how much she earned over her working life or whether she continued to work after the age of 65. How would this likely affect hours worked of retirees?arrow_forwardHow should one interpret the fact that workers with a lot of seniority earn more than newly hired workers?arrow_forward
- How does skill atrophy provide an explanation for differentiation in earnings?arrow_forwardIn a developed country, a significant percentage of the working- age population has some form of disability. The government has implemented policies to increase labor market participation among people with disabilities, including workplace accommodations, anti-discrimination laws, and vocational training programs. However, the employment rate for people with disabilities remains lower than for those without disabilities, leading to economic and social implications. The question is: In this scenario, the government's policies primarily aim to: A) Increase economic dependence among people with disabilities B) Reduce labor force participation C) Enhance labor market inclusion and economic independence for people with disabilities D) Segregate the workforce based on disability statusarrow_forwardHow does path dependency provide an explanation for differentiation in earnings between men & women?arrow_forward
- Suppose that education is the only factor that affects productivity and that an additional year of education raises wages by 2%. Suppose in 2011 gender wage gap was 13%, and the average man had 15 years of education while the average women had 14 years of schooling. a) Using the wage gap decomposition technique, calculate how much of the 13% wage differential is due to discrimination? b) Now suppose in 2021 the gender wage gap is 10%, but the average woman’s education level is increased to 17 year and the average man’s education increases to16 years. (Assume that the return to education stays same at 2%), Was there a decrease or an increase in wage discrimination in the decade? Why?arrow_forwardWorkers in countries such as Sweden and Germany work fewer hours per week, on average, than do workers in the United States. Does this mean that Swedes and Germans are lazier than Americans? Explain how laziness could be interpreted in the context of the work-leisure choice model developed in this chapter. What other information might you want to gather to determine whether Swedes or Germans were indeed less work oriented that Americans?arrow_forwardCan regression be used to estimate the effect of gender on an individual’s earnings?arrow_forward
- More and more of the poor in the United States are women and children. Relate the feminization of poverty to the prevailing view of the poor held by most Americans. Is there an inconsistency? Why or why not?arrow_forwardThe use of group averages to judge individual productivity levels is called Statistical Discrimination. Therefore; this type of discrimination differs from ordinary discrimination because it is based on incomplete information rather than on the utility-maximizing choices of people with accurate information? True Falsearrow_forwardWhat is statistical discrimination? Why do employers use group membership as an indicator of a worker’s productivity? What is the impact of statistical discrimination on the wage of the affected workers? Must statistical discrimination reduce the average wage of blacks or women?arrow_forward
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