EXAM 3 ANSWER KEY
Version A
I. Multiple choice
(1)b. (2)b. (3)d. (4)b. (5)b. (6)b. (7)b. (8)b. (9)b. (10)c.
(11)a. (12)c. (13)c. (14)c. (15)d. (16)a. (17)b. (18)c. (19)b. (20)b.
II. Problems
(1) [Measuring inequality: 14 pts]
- Kink point with percent of population=60 percent and percent of earnings=36 percent.
- 0.24.
- 167 percent.
- 0 percent.
- 167 percent.
(2) [Migration decision: 8 pts]
- Net gain to migration = $-645, so will not move to St. Louis.
- $27,355.
(3) [Roy model: 4 pts]
- 60 < S < 100.
- positively selected.
(4) [Oaxaca decomposition: 6 pts]
- Raw log wage differential is found by substituting each group's average schooling into its own wage equation, to give 2.5 - 2.0 = 0.5.
- The log wage differential due to schooling equals the coefficient of schooling for green workers (who are not subject to discrimination) times the difference in average schooling = 0.1 (12-10) = 0.2.
- The log wage differential due to discrimination is given by the difference in intercepts, plus the difference in slopes times blue workers' average schooling, or (1.3-1.2) + (0.1-0.08)10 = 0.3. Alternatively, the differential due to discrimination may be computed as the raw log wage differential minus the differential due to schooling.
(5) [Employer discrimination: 18 pts]
- E_{G}=0, E_{B}=36, q=72, profit=$360.
- E_{G}=0, E_{B}=25, q=60, profit=$350.
- E_{G}=9, E_{B}=0, q=36, profit=$180.
(6) [Household production-possibility curve: 10 pts]
- "Market goods" intercept=$300, "Household services" intercept=250, kink point with market goods=$200 and household services=150.
- 5 hours.
- 0 hours.
Version B
I. Multiple choice
(1)c. (2)d. (3)d. (4)d. (5)a. (6)c. (7)a. (8)b. (9)c. (10)d.
(11)d. (12)c. (13)a. (14)b. (15)a. (16)b. (17)a. (18)d. (19)a. (20)c.
II. Problems
(1) [Measuring inequality: 14 pts]
- Kink point with percent of population=70 percent and percent of earnings=28 percent.
- 0.42.
- 500 percent.
- 500 percent.
- 0 percent.
(2) [Migration decision: 8 pts]
- Net gain to migration = $594, so will move to St. Louis.
- $28,594.
(3) [Roy model: 4 pts]
- 0 < S < 30.
- negatively selected.
(4) [Oaxaca decomposition: 6 pts]
- Raw log wage differential is found by substituting each group's average schooling into its own wage equation, to give 3.2 - 2.3 = 0.9.
- The log wage differential due to schooling equals the coefficient of schooling for green workers (who are not subject to discrimination) times the difference in average schooling = 0.12 (15-10) = 0.6.
- The log wage differential due to discrimination is given by the difference in intercepts, plus the difference in slopes times blue workers' average schooling, or (1.4-1.3) + (0.12-0.10)10 = 0.3. Alternatively, the differential due to discrimination may be computed as the raw log wage differential minus the differential due to schooling.
(5) [Employer discrimination: 18 pts]
- E_{G}=0, E_{B}=81, q=54, profit=$810.
- E_{G}=0, E_{B}=36, q=36, profit=$720.
- E_{G}=25, E_{B}=0, q=30, profit=$450.
(6) [Household production-possibility curve: 10 pts]
- "Market goods" intercept=$350, "Household services" intercept=250, kink point with market goods=$150 and household services=200.
- 5 hours.
- 10 hours.
[end of answer key]