where Q is the annual quantity sold, and P is measured in dollars. Labor is the only input, and the labor supply curve is perfectly elastic at a wage of $2/hr. Using E to represent total hours worked, the production function is
Male and female workers are equally productive and sell their labor as perfect competitors according to
where the subscripts refer to male and female, and Wm and Wf are the respective weekly wages.
Find Wm ,Wf, Lm, Lf and Q.
Borjas text, Problem 2-12.
In 1999, 4,860 TANF recipients were asked how many hours they worked in the previous week. In 2000, 4,392 of these recipients were again subject to the same TANF rules and were again asked their hours of work during the previous week. The remaining 468 individuals were randomly assigned to a “Negative Income Tax” (NIT) experiment which gave out financial incentives for welfare recipients to work and were subject to its rules. Like the other group, they were asked about their hours of work during the previous week. The data from the experiment are contained in the table below
Total Number of Recipients | Number of Recipients Who Worked At Some Time in the Survey Week | Total Hours Of Work By All Recipients in the Survey Week | |||
---|---|---|---|---|---|
1999 | 2000 | 1999 | 2000 | ||
TANF | 4,392 | 1,217 | 1,568 | 15,578 | 20,698 |
NIT | 468 | 131 | 213 | 1,638 | 2,535 |
Total | 4,860 | 1,348 | 1,781 | 17,216 | 23,233 |
(a) What effect did the NIT experiment have on the employment rate of public assistance recipients? Develop a standard difference-in-differences table to support your answer.
(b) What effect did the NIT experiment have on the weekly hours worked of public assistance recipients who worked positive hours during the survey week? Develop a standard difference-indifferences table to support your answer.