Question: 6.35 The events E and Ti are defined as E 5 the event that someone who is out of work and actively looking for work

6.35 The events E and Ti are defined as E 5 the event that someone who is out of work and actively looking for work will find a job within the next month and Ti 5 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):

PsEuT1d 5 .30 PsEuT2d 5 .24 PsEuT3d 5 .22 PsEuT4d 5 .21 PsEuT5d 5 .20 PsEuT6d 5 .19 PsEuT7d 5 .19 PsEuT8d 5 .18 PsEuT9d 5 .18 PsEuT10d 5 .18 PsEuT11d 5 .18 PsEuT12d 5 .18

a. Interpret the following two probabilities:

i. PsEuT1d 5 .30 ii. PsEuT6d 5 .19

b. Construct a graph of PsEuTid versus i. That is, plot PsEuTid on the y-axis and i 5 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.

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