An increase in unemployment benefits causes the no-shirking wage to increase/ de

Question

An increase in unemployment benefits causes the no-shirking wage to increase/ decrease/ remain the same.

An increase in the disutility of effort causes the no-shirking wage to increase/ decrease/ remain the same.

An increase in the probability that a shirking employee is detected causes the no-shirking wage to increase/ decrease/ remain the same.

An increase in the probability of finding a new job causes the no-shirking wage to increase/ decrease/ remain the same.

Select the correct statements

Select one or more:

a. In each round, all the employees that shirked lose their jobs.

b. An increase in the unemployment rate implies an increase in the no-shirking wage.

c. The lower the unemployment rate, the higher the no-shirking wage.

d. Even if an employee receives a wage higher than the no-shirking wage, he will continue to shirk with some probability.

e. In each round, all the employees that didn't shirk keep their jobs.

f. In this model, if employers had a perfect monitoring technology that allowed them to detect every single shirking worker, the wage would fall to zero.

Explanation / Answer

1. Increase (to incentivize workers)

2. Increase (to compensate the workers)

3. Increase (to keep workers attracted)

4. Increase (to keep the workers attracted and not let them leave)

5. Correct statements: (b) (d) (e)

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