An increase in the wage offered by the employer causes the cost of job loss to i

Question

An increase in the wage offered by the employer causes the cost of job loss to increase/ decrease/ remain the same.

An increase in the worker's reservation wage causes the cost of job loss to increase/ decrease/ remain the same.

The reservation wage depends on unemployment benefits/ the marginal rate of transformation/ the marginal disutility of effort and expected duration of unemployment/ the marginal utility of income/ the inflation rate.

The reservation wage is interpreted as the worker's fallback position/ price-setting power/ incentive-compatibility constraint.

Select the statements which are true with respect to the labor discipline model.

Select one or more:

a. The employer decides the wage that she will pay.

b. The worker chooses her effort level.

c. The effort level is subject to a costlessly enforceable contract.

d. The employer announces a termination schedule t(e) which determines the probability with which a worker will lose her job as function of the amount of effort she puts in.

e. The worker cares about her effort level and her wages.

Explanation / Answer

An increase in the wage offered by the employer causes the cost of job loss to increase.

An increase in the worker's reservation wage causes the cost of job loss to remain the same.

The reservation wage depends on the marginal disutility of effort and the inflation rate.

The reservation wage is interpreted as the worker's incentive compatibility comstraint

Select the statements which are true with respect to the labor discipline model.

Select one or more:

a. The employer decides the wage that she will pay.

b. The worker chooses her effort level.

e. The worker cares about her effort level and her wages.

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