reservation wage in the job search model satisfies the following: wR = z + XX +...
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reservation wage in the job search model satisfies the following: wR = z + XX +∞ wj=wR P(W = wj) wjwRr+q Suppose that the distribution of wages is as in Question 1. (a) Write out this equation above for the specific case where the reservation wage is $18 and the distribution of wages is as given in the table for Question 1. Keep z, A, r and q as parameters. (b) Suppose that z = 10, the discount rate is 0.05 and the job destruction rate is 0.02. What value of λ is consistent with the equation above? (c) Now suppose that the reservation wage increases to $21. Find the new value of λ that satisfies the reservation wage equation, holding other parameters constant (i.e. given z = 10, r = 0.05 and q = 0.02). (d) What do your answers to parts (b) and (c) imply about the relationship between the arrival rate of job offers and the reservation wage? What is the intuition for this result? (e) Compute the steady state unemployment rate that is implied by your solutions to parts (b) and (c). Explain the intuition for why the unemployment rate differs between the two cases. f) In the job search model, Why would someone become unemployed and why would someone remain unemployed? reservation wage in the job search model satisfies the following: wR = z + XX +∞ wj=wR P(W = wj) wjwRr+q Suppose that the distribution of wages is as in Question 1. (a) Write out this equation above for the specific case where the reservation wage is $18 and the distribution of wages is as given in the table for Question 1. Keep z, A, r and q as parameters. (b) Suppose that z = 10, the discount rate is 0.05 and the job destruction rate is 0.02. What value of λ is consistent with the equation above? (c) Now suppose that the reservation wage increases to $21. Find the new value of λ that satisfies the reservation wage equation, holding other parameters constant (i.e. given z = 10, r = 0.05 and q = 0.02). (d) What do your answers to parts (b) and (c) imply about the relationship between the arrival rate of job offers and the reservation wage? What is the intuition for this result? (e) Compute the steady state unemployment rate that is implied by your solutions to parts (b) and (c). Explain the intuition for why the unemployment rate differs between the two cases. f) In the job search model, Why would someone become unemployed and why would someone remain unemployed?
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a WR z A X co wjWR PW wj wj WR r q For the specific case where the reservation wage is 18 and the di... View the full answer
Related Book For
Introduction to Operations Research
ISBN: 978-1259162985
10th edition
Authors: Frederick S. Hillier, Gerald J. Lieberman
Posted Date:
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