8/20/2019 LEC 22 THE LABOUR MARKET.ppt

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THE LABOURMARKET

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DESIRED LEARNING OBJECTIVES

In this chapter, e sha!! !earn"#

• H$ a%es are set in a &ar'et ec$n$&()

• *hat are the sa!ient +n-a&enta!s $+ a%e

-eter&inati$n)• H$ -e&an- an- spp!( $+ !a.$r in a &ar'et

ec$n$&( -eter&ine the a%es $+ $r'ers)

•

*hat a%e -i++erentia!s &ean)• *h( are there /ast -isparities in a%es $+

-i++erent cate%$ries $+ pe$p!e0

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1UNDAMENTALS O1 *AGEDETERMINATION 2 The Genera! *a%e Le/e!

• In $r-er t$ ana!(se !a.$r earnin%s, ec$n$&ists!$$' at the a/era%e rea! a%e0

•

Bt, hat is A/era%e Rea! *a%e)

• 34antit( $+ %$$-s an- ser/ices a $r'er can$.tain ith n$&ina! a%es05

8/20/2019 LEC 22 THE LABOUR MARKET.ppt

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0 4 8 12 16 20 24 28 32Germany

Switzerland

Denmark

Sweden

Japan

United States

France

Italy

United in!d"m

#$stralia 

%anada "rea 

&aiwan

'"rt$!alSource: U.S. Bureau of Labor Statistics

 Hourly Pay in U.S. Dollars

T$ e6a&ine %enera! a%e !e/e!, e !$$' at the

+act$rs n-er!(in% the -e&an- +$r !a.$r0

*hich +act$r -isp!a(s an $/erri-in% i&pact $nthe -e&an- +$r !a.$r)

 7es, it is the Mar%ina! 8r$-cti/it(0

8/20/2019 LEC 22 THE LABOUR MARKET.ppt

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MARGINAL 8RODUCTIVIT7 DI11ERENCES

• 3H$!-in% techn$!$%( an- $ther inpts c$nstant, theree6ists a re!ati$nship .eteen the 9antit( $+ inptsan- the a&$nt $+ $tpt05

• B( the La $+ Di&inishin% Mar%ina! Retrns, eacha--iti$na! nit $+ !a.$r i!! a-- a s&a!!er an-s&a!!er s!a. $+ $tpt0

• In the 1i%re :;0

8/20/2019 LEC 22 THE LABOUR MARKET.ppt

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The !a.$r -e&an- cr/e shi+ts p an- $t $/er ti&eith "

capita! acc&!ati$n

techn$!$%ica! a-/ance&ents

an- i&pr$/e&ents in !a.$r 9a!it(0

8/20/2019 LEC 22 THE LABOUR MARKET.ppt

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MARGINAL 8RODUCTIVIT7 DI11ERENCES

In/esti%ate -eeper an- +$!!$in% 9esti$ns arise"• *hat happens t$ !a.$r pr$-cti/it( i+ the( ha/e

.etter capita! %$$-s t$ $r' ith)

• *hat happens t$ !a.$r pr$-cti/it( i+ the( are

.etter e-cate- an- traine- +$r the @$.)

• *hat happens t$ !a.$r pr$-cti/it( i+ the( sea-/ance- techn$!$%( an- inn$/ati$n at their $r'

p!aces)• Ths, t$-a(s in/est&ent in h&an res$rces !ea-s

t$ acc&!ati$n $+ h&an capita!, hich is /a!e-&ch hi%her in &$st $+ the @$.s0

8/20/2019 LEC 22 THE LABOUR MARKET.ppt

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THE SU88L7 O1 LABOUR

• La.$r spp!( re+ers t$ 3the n&.er $+h$rs that pe$p!e -esire t$ $r' in %ain+!acti/ities05

•

Here, three 'e( +act$rs a++ect the spp!( $+!a.$r, sch as"#

 –H$rs per $r'er0

 –La.$r +$rce 8articipati$n0 – I&&i%rati$n0

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THE SU88L7 O1 LABOUR2H$rs 8er *$r'er 

• H$ &an( h$rs a $r'er ants t$ $r', i!!-eter&ine the spp!( $+ !a.$r0

• Ass&e that a%es rise, an- ($ ha/e $pti$n t$

either $r' &$re $r !ess 0• *hat $!- .e ($r resp$nse)

• It i!! .e -eter&ine- .( t$ e++ects"#

 – S.stitti$n E++ect0

 – Inc$&e E++ect0

• *h( hi%her a%es &a( +irst increase an- then-ecrease the 9antit( $+ !a.$r spp!ie-)

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THE SU88L7 O1 LABOUR 2 8articipati$n Rate

• *$&en participati$n in @$. &ar'et has a!&$st.een a %!$.a! phen$&en$n0

• Risin% a%es an- +a/$ra.!e $r'in% c$n-iti$ns

ha/e c$ntri.te- t$ar-s this tren-0• Bt, there is an$ther aspect $+ $&en

participati$n in $r', hich has n$t recei/e-&ch attenti$n $+ ec$n$&ists0

• An- that is the c$ntri.ti$n $+ $&en in their$n h$&es, !$$'in% a+ter their +a&i!ies, rearin%an- e-catin% chi!-ren, c$$'in%, ashin%,

-stin%, -ec$ratin% h$&es, etc0

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THE SU88L7 O1 LABOUR 2 I&&i%rati$n

• Le%a! an- i!!e%a! i&&i%rati$n $+ $r'ers +r$&nei%h.$rin% c$ntries is an$ther i&p$rtants$rce $+ !a.$r spp!(0

•

8a'istan has acc$&&$-ate- &i!!i$ns $+ pe$p!e+r$& A+%hanistan, Sri Lan'a an- Ban%!a-esh inits @$. &ar'et0

• Th$%h &$st $+ these re+%ees an- i&&i%rants

ta'e p the !$ pai- @$.s?$ccpati$ns, thisphen$&en$n a++ects the spp!( $+ !a.$r, an-!ti&ate!( the a%es0

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*AGE DI11ERENTIALS

• *a%e rates -i++er en$r&$s!( e/er(here0

• A -$ct$r &a( earn