ECON 2304 Lecture Notes - Lecture 19: Efficiency Wage, Signalling Theory, Capital Accumulation
1 Dec 2016
School
Department
Course
Professor
Document Summary
Compensating differentials: compensating differential difference in wages that arises to offset the nonmonetary characteristics of different jobs. Ex: coal miners, fire fighters, night shift workers. Ability, effort, and chance: greater ability or effort usually is rewarded to higher pay. These traits increase a worker"s marginal products, which makes them more valuable to a firm: wages also affected by chance. New discoveries no one could have predicted make some occupations. In jobs where appearance is 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: can lead to discrimination. Superstar phenomenon: superstars arise in markets that have two characteristics. Every customer in the market wants to enjoy the good supplied by the best producer. The good is produced with a technology that allows the best producer to supply every customer at a low cost.
