The events E and T_i are defined as E = the event that someone who is out of work and actively looking for work will find a job within the next month and T_i = the event that someone who is currently out of work has been out of work for i months. For example, T₂ is the event that someone who is out of work has been out of work for 2 months.

The following conditional probabilities are approximate and were read from a graph in the paper ?The Probability of Finding a Job? (American Economic Review: Papers & Proceedings [2008]: 268?273):

a. Interpret the following two probabilities:

i. P(E|T₁) 5 0.30

ii. P(E|T₆) 5 0.190

b. Construct a graph of P(E|T_i) versus i. That is, plot P(E|T_i) on the y-axis and i = 1, 2, ? , 12 on the x-axis.

c. Write a few sentences about how the probability of finding a job in the next month changes as a function of length of unemployment.

Transcribed Image Text:

P(E|T,) = 0.30 P(E|T,) = 0.22 P(E\T,) = 0.20 P(E|T,) = 0.19 P(E|T,) = 0.18 P(E|T,) = 0.24 P(E|T,) = 0.21 P(E\T_) = 0.19 P(E|T,) = 0.18 P(E|T) = 0.18 P(E|T„) = 0.18 10 P(E|T,,) = 0.18