ECON 1116 Lecture Notes - Lecture 20: Signalling Theory, International Trade, Efficiency Wage
14 Apr 2016
School
Department
Course
Professor
Document Summary
In competitive markets the wages workers earn equal the value of their marginal products. There are many factors that affect productivity and wages. A difference in wages that arises to offset the non monetary characteristics of different jobs. Greater ability or effort often command higher pay. These traits increase workers marginal products, make them valuable to the firm. Ability effort and chance are difficult to measure so its hard to quantify their effect on wages looks. People deemed more attractive than average earn 5% more than people of average. Average looking people earn 5-10% more than below average looking people. Good looks matter for productivity: in jobs where appearance is more important attractive workers are more valuable to the firm, command higher pay. Good looks indirectly related to ability: people who make an effort to project an attractive appearance may be smarter or more competent in other ways. Superstars arise in markets that have 2 characteristics.
