LABOR ECONOMICS
8th Edition
ISBN: 9781260004724
Author: BORJAS
Publisher: RENT MCG
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Question
Chapter 6, Problem 9RQ
To determine
The difference between the hypothesis that education increases productivity and education is a signal for the workers innate ability.
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What are the endogenous variables in the labor market model?
Imagine 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.
Do you believe that education serves primarily to increase human capital, or to serve as a signaling mechanism? Why?
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- Imagine 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 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_forwardDerive the Stopping Rule for Investments in Education.arrow_forward
- What is the relevance opportunity cost of a worker whether to accept a new job?arrow_forwardWhat happens to the probability that a particular person works when the wage rises? Does such a wage increase generate an income effect?arrow_forwardDiscuss how empirical studies estimate the rate of return to schooling and the methods used to avoid the problem of ability bias.arrow_forward
- The pandemic caused classes and exams to be cancelled at many universities. Some experts argue that this will result in a cohort of students that will face higher unemployment when compared with students not affected by the pandemic. Describe whether this should be the expected outcome in the context of the following two views: a. signalling view of education; b. human capital view of education.arrow_forwardtwo theories of education: human capital and signaling. Economists have estimated fairly large "sheepskin" effects, where wages increase significantly when someone earns a degree. Do you think these sheepskin effects are consistent with the human capital theory of education or signaling? Carefully explain. Do you think these theories could both hold some merit in the real world? Carefully explain.arrow_forwardSuppose there are two types of jobs in the labor market: “safe” jobs and “risky” jobs. Describe how the worker decides whether to accept a safe job (where she cannot be injured) or a risky job (where she will certainly be injured).arrow_forward
- Discuss Factor Intensity In detail.arrow_forwardSuppose the skills acquired in school depreciate over time, perhaps because technological change makes the things learned in school obsolete. What happens to a worker’s optimal amount of schooling if the rate of depreciation increases?arrow_forwardWhat do you think is the impact of ChatGPT on the economy and job prospects, and how could it potentially change the job market? How do economists view the use of generative AI models such as ChatGPT in terms of increasing shared prosperity and reducing income inequality?arrow_forward
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