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Copyright ?2012 by Pearson Education, Inc. All rights reserved. Modern Labor Economics: Theory and Public Policy, Eleventh Edition Ronald G. Ehrenberg ? Robert S. Smith MODERN LABOR ECONOMICS THEORY AND PUBLIC POLICY CHAPTER Modern Labor Economics: Theory and Public Policy, Eleventh Edition Ronald G. Ehrenberg ? Robert S. Smith 11TH EDITION Copyright ?2012 by Pearson Education, Inc. All rights reserved. Introduction 1 The Relationship in Labor Market Goverment Industry Labor Other groups Individual Social behavior Employers Employees Labor Economics: Some Basic Conceptions Labor Economics Studying of the workings and outcomes of the market for labor 1 The relationship between wages and employment opportunities 2 The interaction among wages, income and the decision to work 3 The way general market incentives affect occupational choice 4 The relationship between wages and undesirable job characteristics 5 The incentives for and effects of educational and training investment 6 The effects of unions on wages, productivity, and turnover Positive Ecnonomics scarcity Rationality Resource scarcity The cost to any decision or action Our choice is constrained by the resource Two Basic Assumption Utility maximization Utility is generated by both pecuniary and nonpecuniary dimensions of employment What is it important about predictions? 1 The predictions emerge directly from twin assumptions of scarcity and rationality. 2 We made the prediction of a negative relationship between wages and voluntary turnover by holding other things equal. 3 The assumptions of the theory concern individual behavior of employers and employees, but the predictions are about an aggregate relationship between wages and turnover. Normative Economics Voluntary transaction Irreciprocal transaction Two kinds of Economics transactions All parties to the transaction gain One or more parties lose When can a transaction be unanimously supported? 1 All parties who are affected by the transac

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