# Economics-AW345

## Economics-AW345 Online Services

Economics

Problem Set 1: Due February 18 at the beginning of class Instructions: Please type your answers, although it.s OK to write in any equations and draw any .gures by hand. Your answers can be submitted in class on paper or by e-mail as a .pdf .le. You are to work on these problems individually.

Note: Problems 1 and 2 are intended to be relatively straightforward. How- ever, you will likely .nd Problem 3 to be more challenging, so you should start to think about it well in advance of the due date.

1. Consider a worker who lives forever, discounting the future at rate r: While unemployed, this worker enjoys .ow utility b and receives job o¤ers, which are iid draws from a known exogenous wage o¤er distribution F(w); at Poisson rate _: Jobs end at exogenous Poisson rate.

(i) Derive the comparative statics of the reservation wage with respect to the job destruction rate, i.e., .nd dR=d_:

(ii) Let u denote the fraction of time that this worker is unemployed. The unemployment rate u can be derived from the steady-state condition,
_(1 􀀀 F(R))u = _(1 􀀀 u):

Derive the comparative statics of the unemployment rate with respect to the job destruction rate, i.e., .nd du=d_: You should .nd that the sign of du=d_ is ambiguous.

2. Sketch the comparative statics of an increase in _ in the basic Diamond- Mortensen-Pissarides (DMP) model. That is, how does an increase in _ a¤ect the equilibrium level of labor market tightness, the wage rate, and the unemployment rate? To answer this question, you should draw the graphs that represent the equilibrium conditions of the model and then explain how the increase in _ shifts these curves.

You can read more about our case study assignment help services here.

## How it Works

#### How It works ?

Step 1:- Click on Submit your Assignment here or shown in left side corner of every page and fill the quotation form with all the details. In the comment section, please mention Case Id mentioned in end of every Q&A Page. You can also send us your details through our email id support@assignmentconsultancy.com with Case Id in the email body. Case Id is essential to locate your questions so please mentioned that in your email or submit your quotes form comment section.

Step 3:- Once we received your assignments through submit your quotes form or email, we will review the Questions and notify our price through our email id. Kindly ensure that our email id assignmentconsultancy.help@gmail.com and support@assignmentconcultancy.com must not go into your spam folders. We request you to provide your expected budget as it will help us in negotiating with our experts.

Step 4:- Once you agreed with our price, kindly pay by clicking on Pay Now and please ensure that while entering your credit card details for making payment, it must be done correctly and address should be your credit card billing address. You can also request for invoice to our live chat representatives.

Step 5:- Once we received the payment we will notify through our email and will deliver the Q&A solution through mail as per agreed upon deadline.

Step 6:-You can also call us in our phone no. as given in the top of the home page or chat with our customer service representatives by clicking on chat now given in the bottom right corner.

## Case Approach

#### Scientific Methodology

We use best scientific approach to solve case study as recommended and designed by best professors and experts in the World. The approach followed by our experts are given below:

Defining Problem

The first step in solving any case study analysis is to define its problem carefully. In order to do this step, our experts read the case two three times so as to define problem carefully and accurately. This step acts as a base and help in building the structure in next steps.

Structure Definition

The second step is to define structure to solve the case. Different cases has different requirements and so as the structure. Our experts understand this and follow student;s university guidelines to come out with best structure so that student will receive best mark for the same.

Research and Analysis

This is the most important step which actually defines the strength of any case analysis. In order to provide best case analysis, our experts not only refer case materials but also outside materials if required to come out with best analysis for the case.

Conclusion & Recommendations

A weak conclusion or recommendations spoil the entire case analysis. Our expert know this and always provide good chunks of volume for this part so that instructors will see the effort put by students in arriving at solution so as to provide best mark.

## Related Services

3. Consider the following extension of the basic DMP model. Unemployed workers meet vacant jobs according to the constant-returns-to-scale contact function, M(u; v); just as in the basic model. However, not all contacts lead to a match. When a worker and .rm meet, a match-special productivity, y; is drawn from an exogenous distribution function, F(y): These match- special productivity draws are independently and identically distributed
across all worker-.rm meetings. If y _ R; the match goes forward, and the worker receives a wage w(y) = _y + (1 􀀀 _)rU; while the .rm receives y􀀀w(y); so long as the match lasts. Otherwise, the worker and .rm continue to search. Matches end at exogenous Poisson rate _; again just as in the basic model.

In this extension, the key endogenous variables are (i) labor market tight- ness, _; (ii) the reservation productivity, R; and (iii) the unemployment rate, u: The corresponding equilibrium conditions are (i) free entry of vacancies,

(ii) zero net surplus at y = R; and (iii) the Beveridge curve. The free-entry condition is more complicated than it is in the basic model because a .rm doesn.t know in advance what value of y will be realized when it meets a worker; that is, ex ante, a .rm with a vacancy can only compute the ex- pected value of meeting a job applicant. The zero net surplus condition is J(R) = 0 or, equivalently, N(R)U = 0: Here J(R) is the value to a .rm of .lling a job when the productivity of the match is y = R; and similarly for N(R): (In general, the value to a .rm of a .lled job is J(y); i.e., depends on the productivity of the match; similarly, the value to the worker is N(y):)

Finally, the Beveridge curve condition needs to account for the fact that not all contacts lead to a match. Write down (and explain) the equations that describe the equilibrium of this extended version of the basic DMP model.

product code: Economics-AW345