LABOR ECONOMICS
8th Edition
ISBN: 9781260004724
Author: BORJAS
Publisher: RENT MCG
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Chapter 6, Problem 6RQ
To determine
The ability bias in the estimation of the
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Discuss how empirical studies estimate the rate of return to schooling and the methods used to avoid the problem of ability bias.
How does path dependency provide an explanation for differentiation in earnings between men & women?
How can we differentiate between the hypothesis that education increases productivity and the hypothesis that education is a signal for the worker’s innate ability?
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- Consider an earnings function. In addition to the usual explanatory variables of experience and schooling, one can include variables for reflecting all of the following factors except: A) industry premiums. B) family background. C) occupational premiums. D) regional premiums. E) unobserved heterogeneityarrow_forwardImagine that the wage-schooling locus is given by w(s)=s^(1/3). What will be the optimal level of education for an individual to take if next period’s earnings in any given time are worth 95% of current earnings for that individual? Answer is s=20/57 I need step by step calculationsarrow_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_forward
- How does skill atrophy provide an explanation for differentiation in earnings?arrow_forwardShow that the competitive labor market compensates workers for the probability that they will be laid off.arrow_forwardIn the competitive labor market model of this chapter, the "value of the marginal product minus the wage" (MPL xP - W) for a given unit of labor (e.g., worker) gives Group of answer choices a) the change in output from the unit of labor being considered. b) the change in profit from the unit of labor being considered. c) the change in revenue from the unit of labor being considered. d) the change in price from the unit of labor being considered. e) the change in cost from the unit of labor being considered.arrow_forward
- The textbook discusses some strategies for correcting for ability bias when trying to estimate the rate of return to education. a) Explain ability bias. b) Discuss the method of using data on identical twins to control for ability bias. c) Discuss the method of using certain birth dates to control for ability bias. The Textbook: Labor Economics, 8th Edition, by George Borjas, published by McGraw-Hill.arrow_forwardImagine a scenario where a worker receives a wage far above the market determined rate for their employment. Using the concept of cognitive dissonance, would this worker be predicted to respond with more or less effort on the job? Explain.arrow_forwardGerhart & Newman (2020) discuss how compensation (pay) may be a measure of justice, i.e., gender, race, culture, etc. They further state that stockholders are interested in executive pay. Why does it matter, and how is it fixed? How risky are these decisions to employee retention?arrow_forward
- is there a gap between the mean earnings for male and female recent college graduates?arrow_forwardSuppose 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_forwardIn the labour-discipline model (LDM), the employer sets the wage to minimise the cost of effort. Using the LDM, illustrate and explain how a change in conditions affect the employee’s best response function (BRF) in the following scenarios: In relation to the hospitality sector (e.g. restaurant industry) in the US: a sharp increase in the pool of unemployed people due to a hiring freeze, combined with a rise in unemployment benefits.arrow_forward
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