Addison Wesley Longman, Inc. © 2000 Chapter 1 Introduction

Addison Wesley Longman, Inc. © 2000 What is Labor Economics? Unique Market –Non-pecuniary factors –Government regulations Study of Behavior Study of Policy

Addison Wesley Longman, Inc. © 2000 Examples Behavior –Wages, opportunities, decision to work, occupational choice, family decisions, willingness to accept poor working conditions, educational decisions, unions, migration, turnover, productivity Policies –Minimum wage, overtime laws, pension reform, OSHA, Social Security reform, income taxes, unemployment insurance, welfare reform, discrimination laws, immigration

Addison Wesley Longman, Inc. © 2000 Government Intervention What are Non-Economics Reasons? What are Economic Reasons? –Market failure How do Markets Fail? –Ignorance, information –Barriers (laws, education costs) –Price distortions (taxes) –No Market (smoking)

Addison Wesley Longman, Inc. © 2000 How Govt. Solves Problems Public Goods – where no market exists Provides Information –Wage information –Safety statistics Capital Imperfections –Student loans Establish market substitute –non-smoking areas Equity/Efficiency

Addison Wesley Longman, Inc. © 2000 Estimated Relationship between Wages and Quit Rates Using Data from Table 1A.1 Figure 1A.1

Addison Wesley Longman, Inc. © 2000 True Relationships between Wages and Quit RatesFigure 1A.2

Addison Wesley Longman, Inc. © 2000 Estimated Relationships between Wages and Quit Rates Using Data from Table 1A.2 Figure 1A.3