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  1. Labor market discrimination: costs and coefficient

Occurs when equivalent labor resources are paid or treated differently even through their productive contributions are equal Cost:

  • Transfer benefits from discriminated to groups which discriminate( get good jobs and better pay)

  • Discrimination is the artificial barrier to free competition, it decreases economic efficiency and reduces production( lower economy`s output and income)

  • Lower contribution of the discriminated groups to the society`s income and well-being

Coefficient (discriminating against black workers )

-Discrimination coefficient – d (discitility )

-the cost of employing a white worker -Ww

“cost” of employing black workers –Wb

The prejudiced employer wiil have no preference between black card white workers when the total cost per worker is the same

Ww=Wb +d

  1. Types of labor discrimination

  • Wage discrimination occurs when members of minorities are paid less than other for doing the same work

  • Employment discrimination takes place when minorities workers receive not good treatment in hiring, temporary layoff, permanent discharges. This type also encompases sexual and racial harassment

  • Occupational discr takes place when minorities workers are restricted or prohibited from entering the more desirable, higher – paying occupation

  • Human capital discr occurs when minorities workers do not have the same access to productivity enhancing investments in education and training

  1. Immigration. Net benefits from immigration.

The movement of migrants from a poor to a rich country:

-increases domestic output in the rich country

-reduces the average wage in the rich country

-increases business income in rich country

The outcomes of immigration become more complicated – upon consideration

-the cost of moving

-the possibility of remittances

-the level of unemployment in each country

-the fiscal impacts of taxpayers

2views of immigration:

-it consists of young, ambitions workers. They increase the supply of g/s increase the demand of g/s with their incomes and spending

-immigrants complete with domestic workers for scare job, pull down the average level of real wages

It can either benefit or form the receiving nation denending on the number of immigrants the rate at which they can be absorbed into the economy without discruption.

Nations seeking to maximize net benefits from immigration should expand immigration until its marginal benefits equal its marginal costs. MB=MC

MB>MC – have to attract people

  1. International trade. Comparative advantage.

Reasons for trading interbationally for countries:

♦ They can import resources they lack at home.

♦ They can import goods for which they are a

relatively inefficient producer.

♦ Specialization sometimes permits economies of

large-scale production.

Both sides must expect to gain from it, otherwise they won’t trade. One country is said to have an absolute advantage over another in the production of a particular good if it can produce that good

using smaller quantities of resources than the other country.

One country is said to have a comparative advantage over another in the production of a particular good if it produces that good less inefficiently than the other country.

When countries differ in relative efficiency with which they produce different goods:

Both world output and the welfare of each country can be increased if:

■Each country specializes in producing the goods for which it has a relative advantage;

■And then trades with the other. Comparative Advantage“Cheap Foreign Labor”: A country can benefit from trade, even if wages in the other country are considerably lower than its own wages.

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