Question

Use the hedonic wage model to show graphically why a male-female wage differential might emerge, independent of skill differences or gender discrimination.

Answer 1

ANSWER:

Below are the curves which clearly shows different combination of the wage rates and a respective nonwage amenity that yields a specific level of the total utility.

1) ISO-PROFIT CURVE: It shows the various combinations of the wage rates and a given level of total gain.

--> The just above figure clearly indicates the slope of iso-profit curve which is less steep than curve Pb.

Finally we can conclude that workers with the stron prefernces fpr fringe benefits will match up with the firms that can give these benefits with low cost.

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