ECO101H1 Lecture Notes - Marginal Revenue, Tiger Woods, G1 Phase

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16 Oct 2011
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Topic 13 Earnings and Discriminations
(Jan 12th)
Outline:
1. The Impact of a Union;
2. Correlates of Marginal Revenue Product (MRP/VMP);
3. Male-Female Earning Gap: discrimination?
4. Pay Equity
Observation:
1. Celine Dion: $30million/yr;
Tiger Woods: $30million/yr;
2. Slightly less talented professionals: $50,000/yr;
3. Earning Differential has increased sharply over time;
Can VMP (economics) explain?
Winner-Take-All Markets
Singers: Now income derived from CDs; everyone can consume the best
19th Century income derived from concerts;
Golf: Now income derived from TV (everyone can consume the best);
19th Century income derived from ticket sales at tournaments;
However, Best plumber earns (modestly) above average hourly wage;
Reason: all customers cannot consumer the services of the best plumber
The Impact of a Union
Correlates of VMP
1. Education
Male, 2001, Full-Time
High School
$41,218
College
$49,224
University
$71,352
N NC No. of Workers
Wage
DDL (=VMP)
SSL
WC
Union wage
Union raises wage rate;
Union reduces employment in this industry;
With the Union, workers are paid VMP;
Higher wage = higher VMP = higher MP = less workers
employed.
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