Chapter 1:
Supply of labor: depends on: * Positively on wage * Negatively on alternate wage * Positively on population size
Demand for labor: * Increase in W lowers demand * Demand for steel reaises demand for L * Rental price increase demand for labor if K and L are subsititutes * Substitution and scale effect- increase in w increase production and increases steel price, cut back on steel and less need for worker * Scale effect: increase in R decreases both demand for capital and labor
Neoclassical economics: * Methodological indivudalism: * Rational choice: * Maximize * Answers: who is the decision maker, what goals are, what constraints * Equalibirum * Pareto efficient: cannot increase well being on one without leaving others unchanged
New Insitutituional economics: explain instiutituions in way of action and goal of indivualds in them
Bounded limited rationality: limited ability to calculate how their deicion affects the future but aware that it does
Chapter 2:
Employment: 1 week 16+, 15 hous. Un: 4 weeks
Not counted: Discouraged: 12 months, Marginally attatched: not looking for one
Labor costs: earnings + benefits= total comp
Straight line: gross expludes overtime. Measured in dolalrs/hour
CPI: biased to overstate increase in true cost of living: does not allow for substitution since its calculated with a fixed basket of goods
Chapter 3:
Answers to 3 questions: firm is deicion maker, goal is to max profit, four contraints: tech, info, policy, market * Profit max: * Actions under firms control- cannot change k in short run * Feasible- 1 million * How to max * Contraints: * Tech: sum of knowledge of methods producing goods and services * Assumpitions: L and K homo to propduce output * MPk MPl, * Info: complete certaintiy: knows all variables when planning * Only function of gov is to protect property rights and enforce contracts * Markets: labor + capital = factor markets * Perfectly compt = sell as much as you want at the price * Product market: * MRPl = MR * MPl * Factor markets: profit maximizing level of employment: MRPl = MCl * Competiative: Short run labor demand curve: MRP= p*MPl = W http://www.nber.org/papers/w17294 Chapter 6: * On The Job Training (OTJ Training): * Learning by doing * On vs off-the-job training * Formal vs Informal * Key economic distinction on OTJ Training is General and Specific * General raises overall productivity for all firms and is portable * Firm specific : no productivity effect on other firms * Firms are multiproduct firms- sells to customers and employees * Spot Market employers: eager and willing to poach talent * Firm pays for specific human capital investments * Worker cannot bid up his wage so has no incentive to pay for training * Cannot rely on spot market for leverage to bid up wage * Worker pays for general human capital investments * Training boosts worker’s MRP by “V” amount but spot markets bid up wage that current employee must offer worker by “V” amount also. Thus, current worker gains V-V=0 and has no incentive to pay for workers training. * In a competitive market, training is efficient and will be carried out * For specific training, raising the post-training wage can lower the turnover rate as it gives more incentive for the worker to stay * Hold up problem: * once employee pays for specific training, it is open to the threat that the worker may threaten to quit if his wage is not increased and possibly destroying value-> leads to the firm being hesitant of offering specific training in the first place * Some studies contradict the model but results may be anomalies: studies show experience has no effect on productivity but has large + effect on earnings, employers do in fact pay for part of general training, specific training does increase productivity * Turnover rates * Specific investments tend to decrease turnover because doing so destroys value * High turnover environments, workers and firms focus on general training to preserve value