Exercise 3 Education as a Signal - = $10y; for For workers in Group H (high-skill workers), the cost of attaining an educational level y is CH(y) workers in Group L (low-skill workers), the cost of attaining an educational level y is CL (y) = $15y. Employees will be offered $60 if they have y ≥ y*, where y" is an educational threshold determined by the employer. They will be offered $20 if they have y < y*. a) Find if in equilibrium, education can be used as a market signal of the worker's skill. b) Find the range for which education can be used as a market signal of the worker's skill (the solution is a range such as 5 ≥ y* > 1)
Exercise 3 Education as a Signal - = $10y; for For workers in Group H (high-skill workers), the cost of attaining an educational level y is CH(y) workers in Group L (low-skill workers), the cost of attaining an educational level y is CL (y) = $15y. Employees will be offered $60 if they have y ≥ y*, where y" is an educational threshold determined by the employer. They will be offered $20 if they have y < y*. a) Find if in equilibrium, education can be used as a market signal of the worker's skill. b) Find the range for which education can be used as a market signal of the worker's skill (the solution is a range such as 5 ≥ y* > 1)
Chapter17: Income, Poverty, And Health Care
Section: Chapter Questions
Problem 11P
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Transcribed Image Text:Exercise 3 Education as a Signal
-
=
$10y; for
For workers in Group H (high-skill workers), the cost of attaining an educational level y is CH(y)
workers in Group L (low-skill workers), the cost of attaining an educational level y is CL (y) = $15y.
Employees will be offered $60 if they have y ≥ y*, where y" is an educational threshold determined by the employer.
They will be offered $20 if they have y < y*.
a) Find if in equilibrium, education can be used as a market signal of the worker's skill.
b) Find the range for which education can be used as a market signal of the worker's skill (the solution is a
range such as 5 ≥ y* > 1)
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