Transcript Problem Session-2

ISL244E
Macroeconomics
Problem Session-9
by
Research Assistant
Serkan Değirmenci
D202/09-10.04.2012
Today
• BLANCHARD (2009), Macroeconomics
- Chapter 6: THE LABOR MARKET: (6.3-6.4-6.5) !!!
(btw pages: 135-156)
 Quick Check (QC): (1-3) (Page: 153)
 Dig Deeper (DD): (4-7) (Page: 153-154)
 Explore Further (EF): (8-9) (Page: 154)
NEXT
- Chapter 7: PUTTING ALL MARKETS TOGETHER: THE ASAD MODEL (btw pages: 157-183)
 Quick Check (QC): (1-4) (Page: 181)
 Dig Deeper (DD): (5-11) (Page: 181-183)
 Explore Further (EF): (12-13) (Page: 183)
A Tour of the Labor Market-Turkey
TÜRKİYE
2010
KENT
KIR
2011
2010
2011
Kurumsal olmayan nüfus (000)
71 707 72 925
49 342
49 839
22 366 23 087
15 ve daha yukarı yaştaki nüfus (000)
52 929 54 122
36 741
37 288
16 189 16 834
İşgücü (000)
25 593 26 254
17 150
17 543
8 444
8 711
22 665 23 678
14 833
15 531
7 832
8 147
=LF/15+
İstihdam (000)
İşsiz (000)
2010
2011
2 929
2 576
2 317
2 011
612
564
İşgücüne katılma oranı (%)
48,4
48,5
46,7
47,0
52,2
51,7
İstihdam oranı (%)
42,8
43,8
40,4
41,7
48,4
48,4
11,4
9,8
13,5
11,5
7,2
6,5
Tarım dışı işsizlik oranı (%)
14,2
12,0
13,9
11,7
15,8
13,3
Genç nüfusta işsizlik oranı(1)(%)
21,6
18,1
24,2
19,7
15,9
14,8
27 336 27 868
19 591
19 745
7 745
8 123
İşsizlik oranı (%)
=U/LF
İşgücüne dahil olmayanlar (000)
(1) 15-24 yaş grubundaki nüfus
Not: Rakamlar yuvarlamadan dolayı toplamı vermeyebilir.
Flows of Workers-Turkey
• İlgili dönemde işgücü hareketleri;
• Aralık 2011 döneminde 1 milyon 649 bin kişi işe yeni
başlamış veya iş değiştirmiş olup, bunun toplam istihdam
içindeki oranı % 7'dir. İşe yeni başlayan veya iş
değiştirenlerin % 28,7'si 25-34 yaş grubundadır.
• Bu dönemde işe başlayan veya iş değiştirenlerin % 20,2’si
"sanayi", % 38'i "hizmetler", % 22,4'ü "inşaat" sektöründe,
% 19,4'ü ise "tarım" sektöründe işe başlamıştır.
• Mevcut işsizlerin % 17,8’ini (458 bin kişi) bu dönemde
işten ayrılanlar oluşturmaktadır.
İŞGÜCÜ DURUMU
(Mevsim Etkilerinden Arındırılmış)
Bir
önceki
döneme
göre İşgücüne
katılma İstihdam İşsizlik
değişim
oranı
oranı
oranı
oranı
İşsiz
(%)
(%)
(%)
(%)
(000)
Yıllar
Bir
Bir
önceki
önceki
döneme
döneme
göre
göre
değişim
değişim
oranı
oranı İstihdam
İşgücü
(%)
(000)
(%)
(000)
2010 Aralık
26 102
0,9
23 260
1,2
2 842
-1,1
49,3
43,9
10,9
2011 Ocak
26 237
0,5
23 467
0,9
2 770
-2,6
49,5
44,2
10,6
Şubat
26 539
1,2
23 862
1,7
2 677
-3,3
49,9
44,9
10,1
Mart
26 578
0,1
23 937
0,3
2 641
-1,4
49,9
45,0
9,9
Nisan
26 639
0,2
23 974
0,2
2 664
0,9
49,9
44,9
10,0
Mayıs
26 640
0,0
23 920
-0,2
2 720
2,1
49,9
44,8
10,2
Haziran
26 811
0,6
24 085
0,7
2 726
0,2
50,1
45,0
10,2
Temmuz
26 765
-0,2
24 094
0,0
2 672
-2,0
49,9
44,9
10,0
Ağustos
26 797
0,1
24 221
0,5
2 576
-3,6
49,9
45,1
9,6
Eylül
26 800
0,0
24 312
0,4
2 489
-3,4
49,8
45,2
9,3
Ekim
26 842
0,2
24 325
0,1
2 517
1,1
49,8
45,1
9,4
Kasım
Aralık
26 894
26 764
0,2
-0,5
24 397
24 274
0,3
-0,5
2 497
2 490
-0,8
-0,3
49,8
49,5
45,2
44,8
9,3
9,3
• 2011 yılı Aralık döneminde mevsim etkilerinden arındırılmış istihdam
edilenlerin sayısında bir önceki döneme göre 123 bin kişilik, işsiz
sayısında ise 7 bin kişilik azalış söz konusudur. Mevsim etkilerinden
arındırılmış işgücüne katılma oranı bir önceki döneme göre 0,3 puanlık
azalış ile % 49,5, istihdam oranı 0,4 puanlık azalış ile % 44,8, işsizlik oranı
ise herhangi bir değişim göstermeyerek % 9,3 seviyesinde gerçekleşmiştir.
Figure 6-2
Chapter-6-QC-1 (Page: 153)
1.
Using the information in this chapter, label each of the following statements true,
false, or uncertain. Explain briefly.
a. Since 1950, the participation rate in the United States has remained
roughly constant at 60%. False. The participation rate has increased over time.
(see page 136) => the participation rate has steadliy increased over time…
b. Each month, the flows into and out of employment are very small
compared to the size of the labor force. False. (see Figure 6.2 on page 137)
c. Fewer than 10% of all unemployed workers exit the unemployment pool
each year. False. (see Figure 6.2 on page 137) => (see page 137-138) 45%
d. The unemployment rate tends to be high in recessions and low in
expansions. True. (see page 139 and Figure 6-3)
e. Most workers are typically paid their reservation wage. False. (see page 142
=> wage determination)
f. Workers who do not belong to unions have no bargaining power.
Uncertain/False. The degree of bargaining power depends on the nature of the
job and the employee’s skills. (see page 142 => wage determination)
g. It may be in the best interest of employers to pay wages higher than
their workers’ reservation wage. True. (see page 143 => efficiency wages)
h. The natural rate of unemployment is unaffected by policy changes. False. (see page 149)
Chapter-6-QC-2 (Page: 153)
2.
Answer the following questions using the information provided in this
chapter. (see page 137 Figure 6-2)
a. As a percentage of the employed workers, what is the size of the
flows into and out of employment (i.e., hires and separations) each
month? (Monthly hires + monthly separations)/monthly employment =(4.4+4.6)/122=7%
b. As a percentage of the unemployed workers, what is the size of the
flows from unemployment into employment each month? 1.4/6.2=23%
c. As a percentage of the unemployed, what is the size of total flows out
of unemployment each month? What is the average duration of
unemployment? (1.4+1.4)/6.2=45%. Duration is 1/.45 or 2.2 months.
d. As a percentage of the labor force, what is the size of the total flows
into and out of the labor force each month? (3+2.8+1.4+1.4)/128.2= 6%.
e. What percentage of flows into the labor force do new workers
entering the labor force constitute? new workers: 0.4/(3+1.4)=9%.
Chapter-6-QC-3 (Page: 153)
3.
The natural rate of unemployment (see section 6.5)
Suppose that the markup of goods prices over marginal cost is 6%, and
that the wage-setting equation is W=P(1-u), where u is the unemployment
rate.
a. What is the real wage, as determined by the price-setting equation?
b. What is the natural rate of unemployment?
c. Suppose that the markup of prices over costs increases to 12%. What happens to
the natural rate of unemployment? Explain the logic behind your answer.
ANSWER:
!!!
ATTENTION:
Difference
between
explanation
and
comment!
a. W/P=1/(1+)=1/1.06= 0.943
b. Wage setting: u=1-W/P= 5.7%
c. W/P=1/1.12= 0.89; u=1-.89= 11%. The increase in the markup lowers the real
wage. Algebraically, from the wage-setting equation, the unemployment rate must
rise for the real wage to fall. So the natural rate increases. Intuitively, an increase
in the markup implies more market power for firms, and therefore less production,
since firms will use their market power to increase the price of goods by reducing
supply. Less production implies less demand for labor, so the natural rate rises.
Chapter-6-DD-4 (Page: 153)
4.
Reservation wages (see page 143 => efficiency wages)
In the mid-1980s, a famous supermodel once said that she would not get
out of bed for less than $10,000 (presumably per day).
a. What is your own reservation wage?
b. Did your first job pay more than your reservation wage at the time?
c. Relative to your reservation wage at the time you accept each job, which job pays
more: your first one or the one you expect to have in 10 years?
d. Explain your answers to parts (a) through (c) in terms of the efficiency wage
theory.
ANSWERS:
a. Answers will vary.
b-c. Most likely, the difference between your actual wage and your reservation wage
will be higher for the job you will have ten years later.
d. The later job is more likely to require training, which means you will be costly to replace, and
will probably be a much harder job to monitor, which means you may need an incentive to
work hard.
Efficiency wage theory suggests that your employer will be willing to pay a lot more than your
reservation wage for the later job, to make the job valuable to you, so you will stay at it and
work hard.
Chapter-6-DD-5 (Page: 153)
5.
The existence of unemployment (see page 143 => bargaining)
a. Suppose the unemployment rate is very low. How easy is it for firms to find
workers to hire? How easy is it for workers to find jobs? What do your answers
imply about the relative bargaining power of workers and firms when the
unemployment rate is very low? What do your answers imply about what happens
to the wage as the unemployment rate gets very low?
b. Given your answer to part (a), why is there unemployment in the economy?
(What would happen to real wages if the unemployment rate were equal to zero?)
ANSWERS:
a. When the unemployment rate is very low, it is very difficult for firms to find
workers to hire and very easy for workers to find jobs. As a result, the bargaining
power of workers is very high when the unemployment rate is very low. Therefore,
the wage gets very high as the unemployment rate gets very low.
b. Presumably, the real wage would grow without bound as the unemployment rate
approached zero. Since a worker could always find a job, there would be nothing to
constrain aggressive wage bargaining. At any positive rate of unemployment,
however, there is some constraint on worker bargaining power.
Chapter-6-DD-6 (Page: 153)
6.
Bargaining power and wage determination (see page 143 => bargaining)
Even in the absence of collective bargaining, workers do have some
bargaining power that allows them to receive wages higher than their
reservation wage. Each worker’s bargaining power depends both on the
nature of the job and on the economy-wide labor markets conditions. Let’s
consider each factor in turn.
a. Compare the job of a delivery person and a computer network
administrator. In which of these jobs does a worker have more bargaining
power? Why?
b. For any given job, how do labor market conditions affect a worker’s
bargaining power? Which labor market variable would you look at to
assess labor market conditions?
c. Suppose that for given labor market conditions [the variable you
identified in part (b)], worker bargaining power throughout the economy
increases. What effect would this have on the real wage in the medium
run? in the short run? What determines the real wage in the model
described in this chapter?
Chapter-6-DD-6 (Page: 153)
ANSWERS:
a. The computer network administrator has more bargaining power. She
is much harder to replace.
b. The rate of unemployment is the most important indicator of labor
market conditions. When the rate of unemployment increases, it
becomes easier for firms to find replacements, and worker bargaining
power falls.
c. In our model, the real wage is always given by the price-setting relation:
W/P=1/(1+).
Since the price-setting relation depends on the actual price level and
not the expected one, this relation holds in the short run and the
medium run of our model.
Chapter-6-DD-7 (Page: 153)
7.
The informal labor market
You learned in Chapter 2 that informal work at home (e.g., preparing meals,
taking care of children) is not counted as part of GDP. Such work also does
not constitute employment in labor market statistics. With these
observations in mind, consider two economies, each with 100 people,
divided into 25 households, each composed of four people. In each
household, one person stays at home and prepares the food, two people
work in the non-food sector, and one person is unemployed. Assume that
the workers outside food preparation produce the same actual and
measured output in both economies.
In the first economy, EatIn, the 25 food-preparation workers (one per
household) cook for their families at home and do not work outside the
house. All meal are prepared and eaten at home. The 25 food preparation
workers in this economy do not seek work in the formal labor market (and
when asked, they say they are not looking for work).
In the second economy, EatOut, the 25 food preparation workers are
employed by restaurants. All meals are purchased in restaurants.
Chapter-6-DD-7 (Page: 154)
a. Calculate measured employment and unemployment and the measured labor
force for each economy. Calculate the measured unemployment rate and
participation rate for each economy. In which economy is measured GDP higher?
b. Suppose now that EatIn’s economy changes. A few restaurants open, and the
food-preparation workers in 10 households take jobs restaurants. The members of
these 10 households now eat all of their meals in restaurants. The food-preparation
workers in the remaining 15 households continue to work at home and do not seek
jobs in the formal sector. The members of these 15 households continues to eat all
of their meals at home. Without calculating the numbers, what will happen to
measured employment and unemployment and to the measured labor force,
unemployment rate, and participation rate in EatIn? What will happen to measured
GDP in EatIn?
c. Suppose that you want to include work at home in GDP and the employment
statistics. How would you measure the value of work at home in GDP? How would
you alter the definitions of employment, unemployment and out of the labor force?
d. Given your new definitions in part (c), would the labor market statistics differ for
EatIn and EatOut? Assuming that the food produced by these economies has the
same value, would measured GDP in these economies differ? Under your new
definitions, would the experiment in part (b) have any effect on the labor market or
GDP statistics for EatIn?
Chapter-6-DD-7 (Page: 154)
ANSWERS:
a.
EatIn
EatOut
Population
100
Population
100
Labor Force
75
Labor Force
100
Employment
50
Employment
75
Unemployment
25
Unemployment
25
Unemployment Rate
33%
Unemployment Rate
25%
Participation Rate
75%
Participation Rate
100%
* Measured GDP is higher in EatOut.
b. The measured labor force and participation rate rise. Measured employment rises.
Measured unemployment does not change, but the measured unemployment rate
falls. Measured GDP will rises.
c. To adjust the labor market statistics, you would have to estimate the number of
workers informally employed at home and add them to the measured employed. To
the extent that workers employed informally at home were measured as
unemployed, you would have to reduce measured unemployment accordingly. To the
extent that workers employed informally at home were considered out of the labor
force, counting these workers as employed would increase the size of the labor force.
Chapter-6-DD-7 (Page: 154)
ANSWERS:
c. To adjust the GDP statistics, you would have to estimate the value-added of final
goods produced at home. You could make comparisons to similar goods produced
outside the home, or make comparisons to workers involved in similar industries
outside the home, estimate the relevant wage and hours worked, and calculate valueadded as the cost of labor, as is done for government services. In either case, you
need to calculate value-added, since intermediate goods—groceries, cleaning
supplies, child care supplies, and so on—involved in the production of at-home goods
are already counted in GDP as final goods in the formal sector.
d. If food preparation at home is counted in GDP and workers involved in food
preparation at home are counted as employed, then the labor market statistics and
measured GDP would be the same in the two economies and the experiment in part
(b) would have no effect.
Chapter-6-EF-8 (Page: 154)
8.
Unemployment spells and long-run unemployment
According to the data presented in this chapter, about 45% of unemployed workers
leave unemployment each month.
a. What is the probability that an unemployed worker will still be unemployed
after one month? two months? six months?
Now consider the composition of the unemployment pool. We will use a simple
experiment to determine the proportion of the unemployment who have been
unemployed six months or more. Suppose the number of unemployed workers is
constant and equal to x (where x is some constant). Each month, 45% of the
unemployed find jobs, and an equivalent number of previously employed workers
become unemployed.
b. Consider the group of x workers who are unemployed this month. After a
month, what percentage of this group will still be unemployed? (Hint: If 45% of
unemployed workers find jobs every month, what percentage of the original x
unemployed workers did not find jobs in the first month?)
c. After a second month, what percentage of the original x unemployed workers
has been unemployed for at least two months? (Hint: Given your answer to part (b),
what percentage of those unemployed for at least one month do not find jobs in
the second month?) After the sixth month, what percentage of the original x
unemployed workers has been unemployed for at least six months?
Chapter-6-EF-8 (Page: 154)
This percentage applies to the economy at any time (remember that we started with
an arbitrary month). Under our assumptions, the percentage of the unemployed
who have been unemployed six months or more is constant.
d. Using Table B-44 of the Economic Report of the President
(www.access.gpo.gov/eop/), compute the proportion of unemployed who have
been unemployed six months or more (27 weeks or more) for each year between
1996 and 2003. How do these numbers compare with the answer you obtained in
part (c)? Can you guess what may account for the difference between the actual
numbers and the answer you obtained in this problem? (Hint: Suppose that the
probability of exiting unemployment goes down the longer you are unemployed.)
Chapter-6-EF-8 (Page: 154)
a.
b.
c.
d.
•
ANSWERS:
55%; (0.55)2= 30%; (0.55)6 = 2%
55%
second month: (0.55)2=30%; sixth month: (0.55)6 = 2%
Average proportion 27 weeks or more over 1990-1999= 16.1%
1996:
17%
2000:
11%
1997:
16%
2001:
12%
1998:
14%
2002:
18%
1999:
12%
2003:
22%
The long-term unemployed exit unemployment less frequently than the average
unemployed worker.
Chapter-6-EF-9 (Page: 154)
9.
Go to the Web site maintained by the Turkish Statistical Institute
(www.turkstat.gov.tr). Find the Labor Force Statistics. Look under the link “Data.”
a. What are the latest monthly data on the size of the Turkish civilian labor force, on
the number of the unemployed, and on the unemployment rate?
b. How many people are employed?
c. Compute the change in the number of unemployed from the first number in the
table to the most recent month in the table. Do the same for the number of
employed workers. Is the decline in unemployment equal to the increase in
employment? Explain in words.
ANSWERS:
a-b. Answers will depend on when the page is accessed.
c. The decline in unemployment does not equal the increase in employment,
because the labor force is not constant.
to be continued…