(Appendix 12.A) Some labour economists argue that it is useful to think of the labour market as being divided into two sectors: a primary sector, where "good" (high-paying, long-term) jobs are located, and a secondary sector, which has "bad" (low-paying, short-term) jobs. Suppose that the primary sector has a high marginal product of labour and (because effort is costly for firms to monitor) firms pay an efficiency wage. The secondary sector has a low marginal product of labour and no efficiency wage; instead, the real wage in the secondary sector adjusts so that the quantities of labour demanded and supplied are equal in that sector. Workers are alike, and all would prefer to work in the primary sector. However, workers who cannot find jobs in the primary sector work in the secondary sector. What are the effects of each of the following on the real wage, employment. and output in both sectors?
a. Expansionary monetary policy increases the demand for primary sector output.
b. Immigration increases the labour force.
c. The effort curve changes so that a higher real wage is needed to elicit the greatest effort per dollar in the primary sector. Effort exerted at the higher real wage is the same as before the change in the effort curve.
d. There is a temporary productivity improvement in the primary sector.
e. There is a temporary productivity improvement in the secondary sector.