Transcript Labor Markets

Labor Markets
Determining Output and Employment
Labor Market Statistics
•
The labor market is a very dynamic market. This makes
it difficult to characterize.
Labor Market Statistics
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•
The labor market is a very dynamic market. This makes
it difficult to characterize.
Recall, Each month, the Department of Labor surveys
60,000 households. Each household is placed in one of
four categories
A.
B.
C.
D.
•
Under 16 or institutionalized (or military)
Choose not to work: Not in Labor Force
Choose to work and are working: Employed
Choose to work, but can’t find a job: Unemployed
Each month, people move between these four categories.
US Labor Market Facts
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US Population: 290M
Civilian Population (16+): 220M
Civilian Labor Force: 147M
Civilian Employment: 139M
Unemployment: 147M – 139M = 8M
Labor Market Statistics
• US Population: 290M
• Civilian Population
(16+): 220M
• Civilian Labor Force:
147M
• Civilian Employment:
138M
• Unemployment: 147M
– 138M = 9M
Participation Rate
(147M/220M)*100 = 66%
Labor Market Statistics
• US Population: 290M
• Civilian Population
(16+): 220M
• Civilian Labor Force:
147M
• Civilian Employment:
139M
• Unemployment: 147M
– 139M = 8M
Participation Rate
(147M/220M)*100 = 66%
Employment Ratio
(138M/220M)*100 = 62%
Labor Market Statistics
• US Population: 290M
• Civilian Population
(16+): 220M
• Civilian Labor Force:
147M
• Civilian Employment:
139M
• Unemployment: 147M
– 139M = 8M
Participation Rate
(147M/220M)*100 = 66%
Employment Ratio
(138M/220M)*100 = 62%
Unemployment Rate
(8M/147M)*100 = 5.4%
Labor Market Statistics
• US Population: 290M
• Civilian Population
(16+): 220M
• Civilian Labor Force:
147M
• Civilian Employment:
138M
• Unemployment: 147M
– 138M = 9M
Participation Rate
(147M/220M)*100 = 66%
Employment Ratio
(138M/220M)*100 = 62%
Unemployment Rate
(8M/147M)*100 = 5.4%
ER = (1-UR)*PR
Labor Market Statistics
• Most unemployment
spells in the US are short.
Unemployed: 9M
<5 WKS: 3m
5-15WKS: 3.5m
>15 wks: 2.5m
Labor Market Statistics
• Most unemployment
spells in the US are short.
Unemployed: 9M
<5 WKS: 3m
5-15WKS: 3.5m
>15 wks: 2.5m
Average Duration
In 1 year, how many people are
unemployed for 5 wks?
Labor Market Statistics
• Most unemployment
spells in the US are short.
Unemployed: 9M
<5 WKS: 3m
5-15WKS: 3.5m
>15 wks: 2.5m
Average Duration
In 1 year, how many people are
unemployed for 5 wks?
(52/5)*3M = 31.2M
Labor Market Statistics
• Most unemployment
spells in the US are short.
Unemployed: 9M
<5 WKS: 3m
5-15WKS: 3.5m
>15 wks: 2.5m
Average Duration
In 1 year, how many people are
unemployed for 5 wks?
(52/5)*3M = 31.2M
For 10 wks?
(52/10)*3.5M = 18.2M
Labor Market Statistics
• Most unemployment
spells in the US are short.
Unemployed: 9M
<5 WKS: 3m
5-15WKS: 3.5m
>15 wks: 2.5m
Average Duration
In 1 year, how many people are
unemployed for 5 wks?
(52/5)*3M = 31.2M
For 10 wks?
(52/10)*3.5M = 18.2M
For 20 wks?
(52/20)*2.5M = 6.6M
Labor Market Statistics
• Most unemployment
spells in the US are short.
Unemployed: 9M
<5 WKS: 3m
5-15WKS: 3.5m
>15 wks: 2.5m
Average Duration
In 1 year, how many people are
unemployed for 5 wks?
(52/5)*3M = 31.2M
How many people are
unemployed for 10 wks?
(52/10)*3.5M = 18.2M
For 20 wks?
(52/20)*3.5M = 6.6M
AD = (31.2/56)*(5wks) +
(18.2/56)*(10wks) +
(6.5/56)*(20wks) = 8.45wks
Labor Market Statistics
• Most unemployment
spells in the US are short.
Unemployed: 9M
<5 WKS: 3m
5-15WKS: 3.5m
>15 wks: 2.5m
• Average duration in the
US is approx. 13wks
Average Duration
In 1 year, how many people are
unemployed for 5 wks?
(52/5)*3M = 31.2M
How many people are
unemployed for 10 wks?
(52/10)*3.5M = 18.2M
For 20 wks?
(52/20)*3.5M = 6.6M
AD = (31.2/56)*(5wks) +
(18.2/56)*(10wks) +
(6.6/56)*(20wks) = 8.45wks
What’s “Normal” in the Labor
Market?
What’s “Normal” in the Labor
Market?
Frictional Unemployment: Currently unemployed, but in
the process of getting a job (i.e., short term
unemployment): Approx. 3.5%
What’s “Normal” in the Labor
Market?
Frictional Unemployment: Currently unemployed, but in
the process of getting a job (i.e., short term
unemployment): Approx. 3.5%
+ Structural Unemployment (chronic unemployment): 1.5%
What’s “Normal” in the Labor
Market?
Frictional Unemployment: Currently unemployed, but in
the process of getting a job (i.e., short term
unemployment): Approx. 3.5%
+ Structural Unemployment (chronic unemployment): 1.5%
“Natural Rate of Unemployment”: 5%
What’s “Normal” in the Labor
Market?
Frictional Unemployment: Currently unemployed, but in
the process of getting a job (i.e., short term
unemployment): Approx. 3.5%
+ Structural Unemployment (chronic unemployment): 1.5%
“Natural Rate of Unemployment”: 5%
• Given the current unemployment rate of 5.4%, we
currently have a cyclical unemployment rate of .4%
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US Unemployment Rate: 1990-2002
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Is the “Natural Rate” Growing?
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The cost of unemployment
• “Capacity Output” of an economy is the level of output
associated with full employment (i.e., unemployment is at
the natural rate)
The cost of unemployment
• “Capacity Output” of an economy is the level of output
associated with full employment (i.e., unemployment is at
the natural rate)
• The “output gap” is the difference between capacity output
and actual output
The cost of unemployment
• “Capacity Output” of an economy is the level of output
associated with full employment (i.e., unemployment is at
the natural rate)
• The “output gap” is the difference between capacity output
and actual output
• Okun’s law states that every 1% increase in cyclical
unemployment increases the output gap by 2.5%.
The cost of unemployment
• “Capacity Output” of an economy is the level of output
associated with full employment (i.e., unemployment is at
the natural rate)
• The “output gap” is the difference between capacity output
and actual output
• Okun’s law states that every 1% increase in cyclical
unemployment increases the output gap by 2.5%.
• Therefore, our current .4% cyclical unemployment rate
implies an output gap of 1.2% GPD ( Roughly $100B! )
Firms and Labor Demand
• In our labor market model. Firm’s are
assumed to be perfectly competitive
Firms and Labor Demand
• In our labor market model. Firm’s are
assumed to be perfectly competitive (they take
wages and prices as given)
Firms and Labor Demand
• In our labor market model. Firm’s are
assumed to be perfectly competitive (they take
wages and prices as given)
• Firms produce output using three types of
input: labor, capital, and technology
Firms and Labor Demand
• In our labor market model. Firm’s are
assumed to be perfectly competitive (they take
wages and prices as given)
• Firms produce output using three types of
input: labor, capital, and technology
• Employment decisions are made in the short
run
Firms and Labor Demand
• In our labor market model. Firm’s are
assumed to be perfectly competitive (they take
wages and prices as given)
• Firms produce output using three types of
input: labor, capital, and technology
• Employment decisions are made in the short
run (capital stock is fixed)
Firms and Labor Demand
• In our labor market model. Firm’s are
assumed to be perfectly competitive (they take
wages and prices as given)
• Firms produce output using three types of
input: labor, capital, and technology
• Employment decisions are made in the short
run (capital stock is fixed)
• Firms choose labor to maximize profits.
Properties of Production
• Production is increasing in all inputs (i.e., the more
inputs you have, the more output you can produce)
• Production exhibits constant returns to scale
(doubling all inputs exactly doubles output)
The Production Function (All
other inputs are fixed)
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Labor Hours
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Properties of Production
• Production is increasing in all inputs (i.e., the more
inputs you have, the more output you can produce)
• Production exhibits constant returns to scale
(doubling all inputs exactly doubles output)
• Production exhibits diminishing marginal product
(increasing only one input will not proportionately
increase output)
Diminishing Marginal Product of
Labor
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Labor Hours
• The Marginal Product of Labor is the additional output
produced from each additional hour of labor
Diminishing Marginal Product of
Labor
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Labor Hours
• The Marginal Product of Labor is the additional output produced
from each additional hour of labor
• MPL(100) = (190-100)/100 = .9
Diminishing Marginal Product of
Labor
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Labor Hours
• The Marginal Product of Labor is the additional output produced
from each additional hour of labor
• MPL(100) = (190-100)/100 = .9
• MPL(700) = (520-490)/100 = .3
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MPL
Output
Diminishing Marginal Product of
Labor
Properties of Production
• Production is increasing in all inputs (i.e., the more inputs
you have, the more output you can produce)
• Production exhibits constant returns to scale (doubling all
inputs exactly doubles output)
• Production exhibits diminishing marginal product
(increasing only one input will not proportionately increase
output)
• Capital and Labor are complements (increasing capital
makes labor more productive and visa versa)
The Production Function
(Increasing Capital Stock)
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MPL
Output
Diminishing Marginal Product of
Labor (increasing capital)
Profit Maximization and Labor
Demand
• Recall that firms take wages and prices as given,
and choose employment to maximize profits.
Profit Maximization and Labor
Demand
• Recall that firms take wages and prices as given,
and choose employment to maximize profits.
• Profit maximization requires that
Marginal Benefit = Marginal cost
Profit Maximization and Labor
Demand
• Recall that firms take wages and prices as given,
and choose employment to maximize profits.
• Profit maximization requires that
Marginal Benefit = Marginal cost
• The marginal cost of an additional hour of labor is
the hourly wage rate (w)
Profit Maximization and Labor
Demand
• Recall that firms take wages and prices as given,
and choose employment to maximize profits.
• Profit maximization requires that
Marginal Benefit = Marginal cost
• The marginal cost of an additional hour of labor is
the hourly wage rate (w)
• The marginal benefit of an hour of labor is the
value of the output produced ( p*MPL )
Profit Maximization and Labor
Demand
• Recall that firms take wages and prices as given, and
choose employment to maximize profits.
• Profit maximization requires that
Marginal Benefit = Marginal cost
• The marginal cost of an additional hour of labor is the
hourly wage rate (w)
• The marginal benefit of an hour of labor is the value of the
output produced ( p*MPL )
• Therefore, profit maximization implies that firms hire
labor according to the rule: (w/p) = MPL
Productivity and Labor Demand
• Firms hire labor
according to
w/p=MPL
Labor Demand
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Productivity and Labor Demand
Labor Demand
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• Firms hire labor
according to
w/p=MPL
• Due to diminishing
marginal returns,
labor demand is
downward sloping
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Productivity and Labor Demand
Labor Demand
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w/p
• Firms hire labor
according to w/p=MPL
• Due to diminishing
marginal returns, labor
demand is downward
sloping
• Note that an increase in
capital increases MPL
and, hence, increases
labor demand
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Households and Labor Supply
• Households in the economy are assumed to be
homogeneous (identical). They take wages, prices, and
income as given and choose the number of hours to work
in order to maximize welfare.
Households and Labor Supply
• Households in the economy are assumed to be
homogeneous (identical). They take wages, prices, and
income as given and choose the number of hours to work
in order to maximize welfare.
• This labor decision problem can be written as a standard
consumer choice problem:
Households and Labor Supply
• Households in the economy are assumed to be
homogeneous (identical). They take wages, prices, and
income as given and choose the number of hours to work
in order to maximize welfare.
• This labor decision problem can be written as a standard
consumer choice problem:
• Two Goods: ( consumption, leisure)
• A relative price (w/p )
• A fixed income (equal to you’re maximum possible earnings)
An example
• You have 80 hours available to
work per week
• The price level is $2
• The wage rate is $10/hr
An example
• You have 80 hours available to
work per week
• The price level is $2
• The wage rate is $10/hr
• Given an income of $800, a
price of consumption of $2 and
a price of leisure equal to $10,
we can plot all affordable
combinations of these two
goods.
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An example
• You have 80 hours available to
work per week
• The price level is $2
• The wage rate is $10/hr
• Given an income of $800, a
price of consumption of $2 and
a price of leisure equal to $10,
we can plot all affordable
combinations of these two
goods.
• Note that the slope is equal to 5
(the relative price of leisure)
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An example
• Lets assume that given a wage
of $10, you choose to consume
40hrs/wk of leisure (i.e., work
40 hrs/wk). What would
happen to your decision if the
wage rose to $12/hr?
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An example
• Lets assume that given a wage
of $10, you choose to consume
40hrs/wk of leisure (i.e., work
40 hrs/wk). What would
happen to your decision if the
wage rose to $12/hr?
• Given your new set of choices,
do you adjust your choice to
work more or less than your
original 40hrs/wk?
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Income/Substitution Effects
• Any relative price change has two distinct
effects on an individual’s decision.
Income/Substitution Effects
• Any relative price change has two distinct
effects on an individual’s decision.
• Substitution Effect: when a relative price
changes, consumers tend to purchase more
of the good that has become cheaper.
Income/Substitution Effects
• Any relative price change has two distinct effects
on an individual’s decision.
• Substitution Effect: when a relative price changes,
consumers tend to purchase more of the good that
has become cheaper.
• Income effect: A price change impacts a
consumer’s overall purchasing power. This causes
the consumer to typically scale up/down
consumption of all goods.
An example
• In this example, leisure has
become more expensive.
Therefore, the substitution
effect would dictate that you
consume less leisure (i.e., work
more)
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An example
• In this example, leisure has
become more expensive.
Therefore, the substitution
effect would dictate that you
consume less leisure (i.e., work
more)
• However, A higher wage raises
your income and, hence, should
increase your consumption of
both consumption and leisure
(i.e., work less)
• We generally assume that the
substitution effect dominates
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Labor Hours
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• Assuming that the substitution
effect dominates (households
respond to higher wages by
working more), labor supply
will be upward sloping
• Its possible that at high real
wages, the income effect begins
to dominate (backward bending
labor supply)
w/p
Labor supply
Another example
• Again, assume that given a
wage of $10, you choose to
consume 40hrs/wk of leisure.
How would your decision
change if you received a $400
gift?
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Another example
• Again, assume that given a
wage of $10, you choose to
consume 40hrs/wk of leisure.
How would your decision
change if you received a $400
gift?
• Note that there is no
substitution effect. A pure
income effect will cause you to
work less (consume more
leisure)
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Labor Hours
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• Again, assume that given a
wage of $10, you choose to
consume 40hrs/wk of leisure.
How would your decision
change if you received a $400
gift?
• Note that there is no
substitution effect. A pure
income effect will cause you to
work less (consume more
leisure)
• This increase in non-wage
income shifts labor supply to
the left
w/p
Another example
Labor Hours
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• Again, assume that given a
wage of $10, you choose to
consume 40hrs/wk of leisure.
How would your decision
change if you received a $400
gift?
• Note that there is no
substitution effect. A pure
income effect will cause you to
work less (consume more
leisure)
• This increase in non-wage
income shifts labor supply to
the left
w/p
Another example
Labor Hours
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• Recall that the labor
supply curve incorporates
the substitution effect and
income effect of a rise in
the current real wage.
Therefore, circumstances
that cause a temporary
ride in the real wage are
represented by movements
along the labor supply
curve.
w/p
Temporary vs. Permanent Wage
Rate Changes
Labor Hours
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• However, permanent
changes in the real wage
create an additional wealth
effect (i.e., changes in
expected future income).
This extra income effect
causes the labor supply
curve to shift.
w/p
Temporary vs. Permanent Wage
Rate Changes
Labor Market Equilibrium
• Add up individual firm’s
hiring decisions to get
aggregate labor demand
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Labor Market Equilibrium
• Add up individual firm’s hiring
decisions to get aggregate labor
demand
• Add up individual household
decisions to get aggregate labor
supply
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Labor Market Equilibrium
• Add up individual firm’s hiring
decisions to get aggregate labor
demand
• Add up individual household
decisions to get aggregate labor
supply
• A labor market equilibrium is a
real wage that clears the market
(i.e., supply equals demand)
• Hers, (w/p)* = 12, L*= 300
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Example: Post-war Germany
• It is estimated that 20-25% of
Germany’s capital stock was
destroyed during WWII. How
would the German labor market
respond to this?
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Example: Post-war Germany
• It is estimated that 20-25% of
Germany’s capital stock was
destroyed during WWII. How
would the German labor market
respond to this?
• A lower capital stock decreases
labor productivity and labor
demand.
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Example: Post-war Germany
• It is estimated that 20-25% of
Germany’s capital stock was
destroyed during WWII. How
would the German labor market
respond to this?
• A lower capital stock decreases
labor productivity and labor
demand.
• If the resulting drop in the real
wage is perceived as
permanent, we could also have
an increase in labor supply
(This only magnifies the initial
effect)
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Example: Post-war Germany
• It is estimated that 20-25% of
Germany’s capital stock was
destroyed during WWII. How
would the German labor market
respond to this?
• A lower capital stock decreases
labor productivity and labor
demand.
• Initially, unemployment would
increase (at a real wage of 12,
100 hours are demanded, 300
are supplied) to 30%
• Eventually, the w/p drops to 8,
employment falls to 200
(unemployment returns to 0%)
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Example: Post war Germany
• Does the previous analysis accurately reflect postwar Germany?
Example: Post war Germany
• Does the previous analysis accurately reflect post-war
Germany?
• Following the war, allied forces imposed price controls –
this forces the real wage to remain at pre-war levels.
Example: Post war Germany
• Does the previous analysis accurately reflect post-war
Germany?
• Following the war, allied forces imposed price controls –
this forces the real wage to remain at pre-war levels.
• During the price control period, unemployment in
Germany was around 11%.
Example: Post war Germany
• Does the previous analysis accurately reflect post-war
Germany?
• Following the war, allied forces imposed price controls –
this forces the real wage to remain at pre-war levels.
• During the price control period, unemployment in
Germany was around 11%.
• Once price controls were lifted, real wages fell and
unemployment dropped from 11% to 1%.
Example:The Bubonic Plague
• The Bubonic Plague, or “Black
Death” ravaged Europe in the
1300’s. From 1347-1352,
approximately 30% of the
population in Europe was killed
(25 million). What impact will
this have on labor markets?
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Example:The Bubonic Plague
• The Bubonic Plague, or “Black
Death” ravaged Europe in the
1300’s. From 1347-1352,
approximately 30% of the
population in Europe was killed
(25 million). What impact will
this have on labor markets?
• A decrease in labor supply
creates a labor shortage (at the
original wage of 12, 300 hours
are demanded while only 100
are supplied)
28
24
20
16
12
8
4
0
0
100
200
300
400
500
Example:The Bubonic Plague
• The Bubonic Plague, or “Black
Death” ravaged Europe in the
1300’s. From 1347-1352,
approximately 30% of the
population in Europe was killed
(25 million). What impact will
this have on labor markets?
• A decrease in labor supply
creates a labor shortage (at the
original wage of 12, 300 hours
are demanded while only 100
are supplied)
• Eventually, the real wage rises
to 16.
28
24
20
16
12
8
4
0
0
100
200
300
400
500
Example: The Bubonic Plague
• Data from this period is hard to find, but the
previous analysis seems to be supported by
history.
Example: The Bubonic Plague
• Data from this period is hard to find, but the
previous analysis seems to be supported by
history.
• Following the plague, massive labor shortages
allowed workers to demand higher wages. (many
landlords initially refused causing riots)
Example: The Bubonic Plague
• Data from this period is hard to find, but the
previous analysis seems to be supported by
history.
• Following the plague, massive labor shortages
allowed workers to demand higher wages. (many
landlords initially refused causing riots)
• Some argue that this dramatic shift in wealth from
the relatively small group of landholders to the
masses of laborers created the catalyst for the
renaissance era.
Analysis of Labor Markets
Labor Demand
Analysis of Labor Markets
Labor Demand
• Firms make labor decisions to
maximize profits given wages
and prices – therefore, they
choose labor according to the
rule w/p = MPL
Analysis of Labor Markets
Labor Demand
• Firms make labor decisions to
maximize profits given wages
and prices – therefore, they
choose labor according to the
rule w/p = MPL
• Any increase (decrease) in labor
productivity raises (lowers)
labor demand
Analysis of Labor Markets
Labor Demand
• Firms make labor decisions to
maximize profits given wages
and prices – therefore, they
choose labor according to the
rule w/p = MPL
• Any increase (decrease) in labor
productivity raises (lowers)
labor demand
– Technological
improvements
– Changes in Capital stock
Analysis of Labor Markets
Labor Demand
• Firms make labor decisions to
maximize profits given wages
and prices – therefore, they
choose labor according to the
rule w/p = MPL
• Any increase (decrease) in labor
productivity raises (lowers)
labor demand
– Technological
improvements
– Changes in Capital stock
Labor Supply
Analysis of Labor Markets
Labor Demand
Labor Supply
• Firms make labor decisions to
maximize profits given wages
and prices – therefore, they
choose labor according to the
rule w/p = MPL
• Any increase (decrease) in labor
productivity raises (lowers)
labor demand
– Technological
improvements
– Changes in Capital stock
• Households choose make labor
decisions to maximize utility
given wages and prices
Analysis of Labor Markets
Labor Demand
Labor Supply
• Firms make labor decisions to
maximize profits given wages
and prices – therefore, they
choose labor according to the
rule w/p = MPL
• Any increase (decrease) in labor
productivity raises (lowers)
labor demand
– Technological
improvements
– Changes in Capital stock
• Households choose make labor
decisions to maximize utility
given wages and prices
• Wages and prices influence a
household’s potential income as
well the cost of leisure
therefore, we must consider
both influences separately
– Income Effects
– Substitution Effects
Analysis of Labor Markets
Labor Demand
Labor Supply
• Firms make labor decisions to
maximize profits given wages
and prices – therefore, they
choose labor according to the
rule w/p = MPL
• Any increase (decrease) in labor
productivity raises (lowers)
labor demand
– Technological
improvements
– Changes in Capital stock
• Temporary increases
(decreases) in wages create an
income effect that is small
relative to the substitution
effect. Therefore labor supply
increases (decreases) – a
movement along the labor
supply curve
Analysis of Labor Markets
Labor Demand
Labor Supply
• Firms make labor decisions to
maximize profits given wages
and prices – therefore, they
choose labor according to the
rule w/p = MPL
• Any increase (decrease) in labor
productivity raises (lowers)
labor demand
– Technological
improvements
– Changes in Capital stock
• Permanent wage increases
(decreases) create an additional
wealth effect that decreases
(increases) labor supply – a
shift in the labor supply curve
Labor Markets in the Long Run
• The US population grows
at a rate of 1.5% per year
28
24
20
16
12
8
4
0
0
100
200
300
400
500
Labor Markets in the Long Run
• The US population grows
at a rate of 1.5% per year
• The growth of labor
supply is less than 1.5%
per year – households
choose to work less
(wealth effects)
28
24
20
16
12
8
4
0
0
100
200
300
400
500
Labor Markets in the Long Run
• The US population grows
at a rate of 1.5% per year
• The growth of labor
supply is less than 1.5%
per year – households
choose to work less
(wealth effects)
• Labor Productivity grows
at a rate of 2% per year
32
28
24
20
16
12
8
4
0
0
100
200
300
400
500
Labor Markets in the Long Run
• The US population grows
at a rate of 1.5% per year
• The growth of labor
supply is less than 1.5%
per year – households
choose to work less
(wealth effects)
• Labor Productivity grows
at a rate of 2% per year
• Real wages grow at
around 3% per year
32
28
24
20
16
12
8
4
0
0
100
200
300
400
500
Labor Markets in the Short Run
• In the short run, labor
markets are hit with
random outside events that
influence productivity
28
24
20
16
12
8
4
0
0
100
200
300
400
500
Labor Markets in the Short Run
• In the short run, labor
markets are hit with
random outside events that
influence productivity
• Shocks that perceived to
be temporary shift labor
demand – a temporary oil
price increase lowers
productivity and labor
demand. This lowers
employment and wages.
28
24
20
16
12
8
4
0
0
100
200
300
400
500
Labor Markets in the Short Run
• Shocks perceived to be more
permanent create wealth effects
that influence labor supply. A
permanent rise in oil prices
create a decline in wealth that
increases labor supply
• Note that permanent shocks
have a larger effect on wages,
but a smaller impact on
employment (in this case,
employment doesn’t change)
28
24
20
16
12
8
4
0
0
100
200
300
400
500
What's Missing?
What's Missing?
• Can households choose how many hours to
work? (Intensive vs. Extensive margin)
What's Missing?
• Can households choose how many hours to
work? (Intensive vs. Extensive margin)
• Are all households the same?
What's Missing?
• Can households choose how many hours to
work? (Intensive vs. Extensive margin)
• Are all households the same?
• Can we describe the US with one labor
market?
What's Missing?
• Can households choose how many hours to
work? (Intensive vs. Extensive margin)
• Are all households the same?
• Can we describe the US with one labor
market?
• Are wages/prices flexible?
What's Missing?
• Can households choose how many hours to
work? (Intensive vs. Extensive margin)
• Are all households the same?
• Can we describe the US with one labor
market?
• Are wages/prices flexible?
• What about non-wage benefits?