73: Theories of Income Disitribution Flashcards

1
Q

marginal productivity theory of income distribution

A

division of income among factors of production is determined by each factor’s marginal productivity at market equilibrium

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2
Q

why do some workers earn more than others? (6)

A

1) compensating differentials
2) payed equilibrium value of marginal product (diffs in talent)
3) human capital
4) efficiency wages
5) unions
6) discrimination

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3
Q

compensating differentials

A

wage differences across jobs that reflect that some jobs are less pleasant/more dangerous than others (paid more to compensate for unpleasantness)

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4
Q

unions

A

organizations of workers that try to raise wages and improve working conditions by bargaining collectively

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5
Q

efficiency wages

A

when employers pay above equilibrium level wages as and incentive for better performance and loyalty

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6
Q

collective bargaining

A

negotiating contracts between union members and employers, rather than for all individual

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7
Q

craft union

A

unions of skilled workers –> harder to replace during strike

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8
Q

closed shop

A

only union members can be hired (illegal)

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9
Q

union shop

A

all employees must join the union

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10
Q

right to work laws

A

laws that prevent union shops

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11
Q

industrial union

A

union that spans an entire industry

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12
Q

union theory

A

increase wages by increasing demand or decreasing supply

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13
Q

how to increase demand for labor (3)

A

1) invest in human capital to inc MP
2) reduce labor substitutes (ex: reduce min wage)
3) advertise product of union workers

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14
Q

how to decrease supply of workers (3)

A

1) limit union membership
2) licensing to limit ability to enter craft
3) limit immigration

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