7. Consider that education is a continuous variable, where eд and e, respectively denotes years of schooling for high and low ability worker where 0 denotes the share of high-ability workers in the economy. The cost of education per year for these types of worker is ch and c (with c = 0). Wages received by these workers (under perfect information) are wh and w₁ respectively. Find the condition of "separating equilibrium". If ch 15000, wh=40000& 20000, for what values of 0 is a pooling equilibrium possible? W₁ = 1 = (2+3)
7. Consider that education is a continuous variable, where eд and e, respectively denotes years of schooling for high and low ability worker where 0 denotes the share of high-ability workers in the economy. The cost of education per year for these types of worker is ch and c (with c = 0). Wages received by these workers (under perfect information) are wh and w₁ respectively. Find the condition of "separating equilibrium". If ch 15000, wh=40000& 20000, for what values of 0 is a pooling equilibrium possible? W₁ = 1 = (2+3)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:7. Consider that education is a continuous variable, where eд and e, respectively denotes
years of schooling for high and low ability worker where 0 denotes the share of high-ability
workers in the economy. The cost of education per year for these types of worker is ch and c
(with c = 0). Wages received by these workers (under perfect information) are wh and w₁
respectively. Find the condition of "separating equilibrium". If ch 15000, wh=40000&
20000, for what values of 0 is a pooling equilibrium possible?
W₁ =
1
=
(2+3)
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