Exam 2: Labour Supply: Individual Attachment to the Labour Market

Which one of the following regarding to an individual's budget constraint is correct?

Which of the diagrams given below corresponds to a budget line that involves an increase in nonlabour income? (a) (c) (b) (d)

The slope of the indifference curve at the lower left-hand corner of the income/leisure diagram, where zero hours are supplied to the labour market, is equal to:

For a worker who is deciding how many hours of labour to supply, all of the following are true except that:

Our income-leisure model suggests that a worker works overtime because:

A major and recurring theme of this textbook is the role of empirical research in labour economics. Conceptual models exist to analyze many labour market phenomena, but often the predictions that emerge are ambiguous. It is the objective of empirical research to test the validity of these predictions, and to try to sort out the multiple effects, which may work simultaneously. Such is the case for the theory of individual labour supply. Discuss the major conceptual implications of this model as well as the results from the empirical literature with correspond to them. The key is to link the predictions, which flow from the model, to the hypotheses that have been examined in the literature. In particular, your response can follow the following outline: • Without getting bogged down in technical details (i.e., don't give a graph), explain intuitively the role of preferences and constraints in determining the optimal choice of hours worked. • What is the impact on the choice of hours worked by an individual if the level of non-market income changes? • Briefly describe the income effect and the substitution effect of a wage change, and relate this to the backward bending supply curve. • A large number of econometric studies have estimated the shape of the labour supply curve, the sign of the wage elasticity of labour supply, and the income elasticity of labour supply. What have they found, generally speaking, regarding the slope of the supply curve? Does the slope differ between men and women? • Figure 2.3 in the textbook shows what appears to be a slight negative empirical relationship acros countries between per capita national income and male labour force participation rates, coupled with slight positive empirical relationship across countries between per capita national income and female labour force participation rates. It might be possible to interpret these observed empirical patterns in terms of substitution effects and income effects.

The equation for the unemployment rate (UR) is:

Over the backward bending portion of the labour supply curve,

Which of the following statements concerning the elasticity of labour supply is false?

The reservation wage is defined as:

Empirical literature on labour supply patterns for married women tends to find all of the following, except: