Contemporary Labor Economics 9th Edition by Campbell Mcconnell, Stanley Brue, David Macpherson, Robert Powell, David Colander

Exercise 5

Suppose all workers and jobs in a hypothetical economy are homogeneous. Explain why no wage differentials would exist if this economy were perfectly competitive and information and mobility were costless. Explain why wage differentials would arise if, on the other hand, information and mobility were imperfect and costly.