shapiro-stiglitz

Question 1

Assumptions

Answer 1

I –> workers

N–> firms

Question 2

effort level

Answer 2

ê (e bar) or 0

Question 3

probability of job destruction at time t₀

Answer 3

P(t)=e^{<span>-b(t-t_o)</span>}

^{<span>b>0</span>}

=P(t+tau)/P(t)

=e^-b(tau)

^{(probability of being employed at time t is independent of t+tau)}

Question 4

job breakups occur with probability

Answer 4

b

Question 5

detection of shirking follows a ______ process

Answer 5

poisson

Question 6

detection of shirking occurs with probability __ per unit time

Answer 6

q

Question 7

V_E

Answer 7

value of being employed and exherting effort

Question 8

unemployed workers find employment at rate __ per unit time

Answer 8

a

Question 9

V_u

Answer 9

value of being unemployed

Question 10

worker discount rate is__

Answer 10

p (rho)

Question 11

wage

Answer 11

w

Question 12

no shirking condition

Answer 12

pV_s=w-(b+q)(V_s-V_u)

pV_u= 0+a(V_E-V_U)

Question 13

given effort cant exceed ebar, no incentive to pay any excess so

Answer 13

V_E=V_S

Question 14

V_E-V_u=

Answer 14

ebar/q

Question 15

wage needed to induce effort

w=

Answer 15

ebar + (a+b+p)(ebar/q)

Question 16

wage is decreasing in:

Answer 16

probability that shirkers are detected q

Question 17

in steady state

Answer 17

movements in and out of employment balance

Question 18

Number of workers becoming unemployed per unit time=

Answer 18

Nhb

Question 19

Lbar=

Answer 19

total # of available workers

Question 20

L=

Answer 20

workers exherting effort hired per firm

Question 21

product of labor

Answer 21

F

Question 22

Marginal product of labor=

Answer 22

F^’

Question 23

firms hire up to the point where the marginal product of labor equals the ____

Answer 23

wage

Question 24

is there a wage at full employment that can deter shirking?

Answer 24

no

Question 25

the firms problem is to _________________

Answer 25

set wage high enough to prevent shirking, then choose L

Question 26

if there were perfect monitoring of shirking, there would be_____

Answer 26

full employment

Question 27

equilibrium occurs where the__________________

Answer 27

the aggregate demand for labor intersects the no shirking condition

Question 28

if wage goes up

Answer 28

fewer workers are demanded L down

Question 29

eq for number of of workers becoming unemployed per unit time:

Answer 29

NLb

Question 30

eq for number of unemployed workers finding jobs:

Answer 30

(Lbar-NL)a