Alternative Measures, analyze the labor market before, during, and after the financial crisis

For this box you will analyze the labor market before, during, and after the financial crisis.You will analyze the 2006-2016 period; these are the years that have the same unemployment rates at both end-points (4.7% in both January 2006 and December 2016).- Go to (Links to an external site.)Links to an external site. and look for 1) the Unemployment Rate; 2) Labor Force Participation Rate; and 3) hours of work (search: total private average weekly hours of all employees).The purpose of this box is to document and explain these three indicators during the Great Recession.The participation rate and hours correspond to the extensive and intensive margins, respectively. The “extensive margin” refers to whether to work or not, and the “intensive margin” refers to how many hours —once one has decided to work.

Unformatted Attachment Preview

Don't use plagiarized sources. Get Your Custom Essay on
Alternative Measures, analyze the labor market before, during, and after the financial crisis
Just from $13/Page
Order Essay

ECON 562
Macroeconomic Analysis & Public Policy
Module 4: Households Labor-Leisure
Copyright 2017 Montclair State University
A One-Period Model of a Household
Optimal Allocation of Time
The Labor Supply
Taxes on Labor
Every day we have to decide how
to allocate our time between labor
and leisure.
How can we model this
economic decision?
ECON 562
Macroeconomic Analysis & Public Policy
Module 4a: A One-Period Model
A One-Period Model
In this module, we develop a theory of households who live for just one
So we model how a “representative” household chooses:
• How much to work and
• How long to stay home
The model’s predictions are consistent with the data.
A One-Period Model
In this one-period model what you earn, you consume, but you also like to
rest and/or socialize.
So let’s suppose that household utility for consumption ? and leisure ? is
given by:
???? + ? – ? ???
And there is a time constraint
? + ? = ??,
and a budget constraint
? = ??.
There are 16 hours in a day that can be either spent working (?) or spent on
leisure (?).
Optimal Allocation of Time
Solving for ? in the time constraint and substituting ? and ? in the utility
function we get:
??? ? + ??? ? + ? – ? ?? – ?
To find the optimal choice of L, we take the derivative of this function with
respect to L and set it equal to 0,
? ?-?

? ?? – ?
This yields
? = ???.
Hours of work are proportional to the weight on consumption (and
independent of ?!)
The Labor Supply
So, how could it be that the wage rate does not affect the
decision on hours?
Wages matter, of course, but there are two opposing forces
that make them ‘disappear’ from the solution of the problem:
• If wages go up, your time endowment is worth more, and as you are richer
you want more ? and ?, that is, to work less (income effect).
• But, if wages go up, the (opportunity) cost of ‘staying home’ rises, and you
want less leisure and work more (substitution effect).
Taxes on Labor
The solution is consistent with the data!
Hours worked per-capita are trendless over long-periods of time, even
though wages have been increasing over time with productivity.
This finding has fiscal implications.
Unlike the tax on capital, which reduces the capital stock, taxes on wages
don’t appear to be distortionary (based on this model specification).

Purchase answer to see full

Order a unique copy of this paper
(550 words)

Approximate price: $22

Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
The price is based on these factors:
Academic level
Number of pages

Order your essay today and save 15% with the discount code ESSAYHELP