Fichas
Compensating Wage Differentials
Fichas del conjunto (28)
- 1What is the principle of compensating wage differentials?Unpleasant jobs receive higher wages to compensate for unpleasant work experienced
- 2What characteristics might receive compensating wage differentials?- Dangerous
- Risky
- Anti-social hours
- Employment instability
- Poor non-wage benefits - 3What is the most regularly modelled compensating wage differential characteristic?Risk
Firms may have risky environments because it is cheaper to pay higher wages than make the environment safer - 4How is worker utility measured?As a function of wage and risk
- 5What is the reservation wage?The wage in which a worker is indiffernet between a risky and a safe job
w0 is a safe job
w2 is a risky job
wr = w2 - w0 - 6Why is the demand curve downward sloping?As bribe decreases, demand for workers increases
- 7Why is the supply curve upward sloping?As bribe increases, the number of workers attracted to the job also increases
- 8How is the market determined equilibrium bribe calculated?Intersection of supply and demand curve
- 9What is the hedonic wage function?The relationship betwenn wage and job characteristics
- 10What changes the shape of the indifference curves?Worker preferences
More risk averse = steeper - 11What is an isoprofit curve?Depicts all risk-wage combinations that yield the same profit
- 12What properties do isoprofit curves have?Upwards sloping and concave
Workplace can only be made safer if wages decrease (profit constant) - 13How does isoprofit position effect profits?Higher isoprofits = lower profit
- 14How is the hedonic wage function constructed?Workers are firms match on risk environment and preferences (tangency)
The slope between tangencies = hedonic wage function - 15What does the slope of the hedonic wage function indicate?The extra wage required to accept a slightly riskier job (average worker)
- 16What wage must seasonal jobs offer?A higher wage as offering fewer hours at the initial wage whould reduce a worker's utility
- 17What is the main prediction of the hedonic wage theory?Wage differentials compensate for unattractive job characteristics
- 18Give the equation used to estimate this predictionWage as a function of the individual’s personal characteristics and the non-wage characteristics of the individual’s job
Unobserved characteristics of workers not included many lead to OVB - 19What type of good are good working conditions likely to be?Normal goods
As income increases consumption of good working conditions increase - 20How must ability be regressed to avoid bias?Regress induviduals of different abilities in seperate groups
+ive wage function
When ability cannot be controlled for, scatter plots for different ability groups are combined producing -ive wage function - 21What is panel data? Why is it used?A dataset that follows individual observations over time
Controls for OVB that occurs through time invariant variables - 22What assumption is made in using panel data?Assumes ability does not change after a certain point
- 23What are the 2 possible strategies when using longitudinal data?1. Follows worker who change jobs + identifies CWB based on the relationship between wage and the job: controls for time-invariant characteristics using induvidual fixed effects
2. Analyses natural experiments that modify characteristics of jobs held by similar workers: credible source of variation - 24What 2 problems does the first strategy generate?1. Many job characteristics are unobservable and omitted variable bias may still occur
2. Workers move to 'better' jobs (higher pay and more desirable characteristics) - 25What do studies using the second strategy generally find?Find evidence consistent with the theory of CWD
- 26Give 2 additional issues faced by studies on compensating wage differentials- Heterogeniety of induvidual preferences: not necessarily unanimous agreement on unpleasant characteristics. Can only focus on clear +ives or -ives such as death
- Hard to measure working conditions as there is bias in reporting. Lower wage workers are more likely to be disatisfied and find fault with their workplace. Deaths and injuries easier to measure - 27What is the value of a statistical life?The amount workers are jointly willing to pay to reduce likelihood that one will die in a given year on the job
- 28Summarise 2 complimentary studies about the valie of a statistical life What was found?Thaler and Rosen (1976)
Estimates weekly wage equation but unobservables may have biased estimates
VSL calculated to be $176,000 per year to eliminate probability of death
Hwang et al. (1992)
Shows Thaler and Rosen (1976) under evaluates VSL
Their corrections estimate $1,510,000 nearly 10 times larger
Información
- Descripción
- Year 2 ECN21005 - Labour Economics Fichas sobre Compensating Wage Differentials, creado por Imogen Donoghue el 27/01/2023.
- Creado por
- Imogen Donoghue · ene 2023
- Actualizado
- 30 ene 2023
- Visitas
- 4
- Valoración