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Labor Economics > Lecture 1, 2, 3, 4, 5 Labor Supply > Flashcards

Lecture 1, 2, 3, 4, 5 Labor Supply Flashcards

1
Q

Economic Efficiency

A

producing more goods and services with the same level of inputs

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2
Q

Market Failures

A

The actual pricing of productive services are not set at the efficient market level

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3
Q

Economic Equality

A

The distribution of income or wealth across people when ranked from the poorest to the richest

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4
Q

positive economics

A

tells us what will happen based on theory

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5
Q

normative economics

A

Tell us what we think should happenbased on judgement of policy objectives, effectiveness, efficiency, and equity

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6
Q

Employed

A

working paid for at least one hour a week or working unpaid for at least 15 hours a week

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7
Q

Unemployed

A

on temporary layoff from a job; have no job but actively looking for work over the past month

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8
Q

Not in Labor Force (NILF)

A

Not working and not looking for work

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9
Q

Labor Force

A

Employed plus Unemployed

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10
Q

Labor Force Participation Rate

A

Labor Force/ Population

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11
Q

Hidden unemployed

A

persons who have given up their search for work and have therefore left the labor force

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12
Q

Slope of indifference curve represents

A

Marginal rate of substitution; the rate at which a person is willing to give up some consumption for more leisure

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13
Q

Slope of budget constraint

A

price of good a/price of good b

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14
Q

Optimal Consumption Point

A

Pa/Pb = MUa/MUb

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15
Q

Slope of indifference curve

A

MUa/MUb

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16
Q

Budget Constraint

A

wh+ V

17
Q

Slope of budget constraint

A

-w

18
Q

Income Effect

A

you have more income so you do not need to work as many hours to be able to consume the same amount of goods.

19
Q

Substitution Effect

A

the rate of substitution between consumption and leisure has changed so now it costs more to consume an hour of leisure.

20
Q

Reservation Wage

A

Minimum increase in income that would make a person indifferent between living off of their nonlabor income V and working that first hour to earn w.

21
Q

Endowment Point

A

the amount of C if all hours devoted to L, puts the individual on indifference curve Uo

22
Q

How to find the aggregate supply curve

A

add up supply curves of individual workers

23
Q

Labor Supply Elasticity

A

∆H/H / ∆w/w = Percentage change in hours worked/Percentage change in wage

24
Q

Shape of perfectly inelastic supply curve

A

vertical

25
Q

Shape of perfectly elastic supply curve

A

horizontal

26
Q

Factors which influence labor supply elasticity

A

share of worker’s budget due to labor income, time horizon, if job is necessary to obtain other benefits, availability of close job substitutes

27
Q

What does the Carnegie Conjecture say?

A

large inheritance decreases LFP, reduces hours

28
Q

Wages (increase/decrease) over time for worker

A

increase

29
Q

Hours (increase/decrease) over time for worker

A

increase as wage increases

30
Q

Added Worker Effect

A

A secondary worker chooses to enter labor force during recession. Counter-cyclical because increase LFP when wages lower

31
Q

Discouraged Worker Effect

A

Unemployed workers find it difficult to find jobs during recession, so they drop out of labor force. Pro-cyclical because decrease LFP when wages decrease

32
Q

How does taxes affect LFP?

A

depends. income effect dominates - work more hours when taxes increase. substitution effect - work less hours when taxes increase

33
Q

How does welfare reduce labor supply?

A

cash benefit for not working; high benefit reduction rates; income effect; increases reservation wage

34
Q

What are some characteristics of the 1996 welfare reform?

A

de-link medicaid and welfare; increase eitc; power to states; work requirements; lifetime limits; reduce cash-assistance and increase non-cash assistance

35
Q

EITC

A

federal income tax credit for low income workers that varies by earning level

Labor Economics (4 decks)

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