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As long as the real wage, (w/p) * determined by demand conditions remains above the full employment real wage, (w/p) F, the labor market is not clearing and we have involuntary ...
Higher wage w, higher supply of labor. This is a positive causal effect on employees. Labor Demand; h d =α 2 w+β 2 z 2 +u 2. Higher wage w, lower demand for labor.
If the realized output is above the critical output , then the principal does not conduct the investigation into the effort level chosen by the agent and gives a higher wage w H than w ...
Real Wage (w/p) 0 (w/p)* L D 0 L * L S 0 Employment It is important to note that the labour supply and demand are determined by real as opposed to nominal wages.
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When the supply of labor facing the firms is S 1, the firm hires L 1 units of labor at wage w 1. But when the market wage rate decreases and the supply of labor shifts ...
Incase that the agent chooses the high effort e H, the principal gives a higher wage w H than w L to the agent whether the principal conducts theinvesigation or not.
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