Question

 

1. Technological advancements likely contributed to the "hollowing out" of the earnings distributions because they

a. are biased towards those with high skills

b. allow firms to substitute technology for unskilled workers

c. complement the skills of highly educated workers

d. allow firms to substitute technology for workers who perform routine tasks

e. all of the above

2. Which of the following is not an implication of search theory?

a. workers will be unemployed until they receive an offer that is above their reservation value

b. identical workers (same human capital, preferences, etc) will be paid the same wage

c. workers searching in a market with few opportunities will have lower reservation wages than workers searching in a market with many opportunities, all else equal

d. Employers will earn monopsony rents from job matches

e. All of he above are implications of search theory

3. James is currently unemployed. He gets upset whenever he looks because none of the job postings are for workers with his particular skill set. What type of unemployment is James experiencing?

a. frictional unemployment

b. seasonal unemployment

c. cyclical unemployment

d. structural unemployment

e. a combination of types (explain which)

Answer 1

1. e) all of the above

Technological developments often replace the unskilled labor, they complement the work of the skilled people, it also takes the place of the routine tasks performed by people.Due to all these factors the earning is not equally distributed and there is a disparity and hollowing out.

2. b) identical workers will be paid the same wage
Search theory describes about the disparity and friction in the employment market. Where the identical workers are paid same wage there friction wont be there, thus search theory is not applicable here and this is not an implication of search theory.

3. d) Structural unemployment
When there is a mismatch in the market between what the worker can provide and what is demanded by the employers. The skilss possessed by the worker is not sufficent or is not the thing asked by the employer. This is known as structural unemployment. In the example too, James is not getting through any job postings as per his skill and that is the reason he is unemployed. So he is facing structural unemployment.