LABOR ECONOMICS
LABOR ECONOMICS
8th Edition
ISBN: 9781260004724
Author: BORJAS
Publisher: RENT MCG
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Chapter 6, Problem 2P
To determine

The education path that maximizes Person P’s net present value.

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Suppose a worker with an annual discount rate of 8 percent currently resides in Chicago and is deciding whether to remain there or to move to Phoenix. There are three work periods left in the life cycle. If the worker remains in Chicago, he will earn $40,000 in each of the three periods. If the worker moves to Phoenix, he will earn $43,500 in each of the three periods. What is the highest cost of migration that a worker is willing to incur and still make the move?
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