Question

Question: State whether each of the following Statements is Tue or False

1.  The hedonic theory of wages predicts that workers who value job safety most will tend to work for firms that have the lowest cost of providing safe jobs, ceteris paribus.

2. The added worker effect is counter-cyclical while the discouraged worker effect is pro-cyclical during recession.

Answer 1

As we know that hedonic wage function reflect the relationship between wages and job characteristics. The theory predicts that other things equal, workers who value job safety least will tend to work for firms that have the highest cost of providing safe jobs.

1). The correct option is (True).

2). The correct option is (True).

We know that discouraged worker effect implies that the participation rate is procyclical and the added worker effect is counter cyclical during recession.

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