Application of the WS-PS Model to the Gig Economy and Inequality
The WS-PS model can be extended to illustrate the implications for inequality that arise from the combined effects of rising market power, the weakening of trade unions, and the emergence of the gig economy. This comprehensive analysis is depicted in Figure 2.25.
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Ch.2 Unemployment, wages, and inequality: Supply-side policies and institutions - The Economy 2.0 Macroeconomics @ CORE Econ
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Figure 2.24: Initial Equilibrium Setup
Application of the WS-PS Model to the Gig Economy and Inequality
Consider an economy where two changes occur simultaneously over several years: 1) a general decrease in market competition allows firms to set prices further above their production costs, and 2) a widespread decline in the negotiating strength of workers reduces their ability to secure higher pay. What is the most likely combined outcome for the economy's equilibrium real wage and unemployment rate?
Analyzing Labor Market Trends
Reconciling Labor Market Shifts
Evaluating Competing Forces in the Labor Market
Analysis of Combined Labor Market Shifts in Figure 2.24
Learn After
Net Effect on Inequality: Comparing Profit Share and Unemployment Effects
Figure 2.25: Lorenz Curves for Initial and New Equilibria
Analyzing Modern Labor Market Dynamics
A national economy sees a significant expansion of the 'gig economy,' where workers are often classified as independent contractors. This trend is associated with a decrease in workers' collective bargaining power and an increase in the market power of the platforms that hire them. According to the wage-setting (WS) and price-setting (PS) model, what is the most likely combined outcome of these changes on the labor market equilibrium?
Evaluating Labor Market Trends and Inequality
Within the wage-setting and price-setting framework, a simultaneous increase in firms' market power and a decline in workers' collective bargaining power—trends often associated with the growth of a 'gig economy'—will necessarily result in a higher equilibrium rate of unemployment.
Deconstructing Labor Market Shifts and Inequality
Match each labor market trend to its specific consequence within the wage-setting (WS) and price-setting (PS) framework.
A national economy experiences a rapid expansion of its 'gig economy,' characterized by a decline in workers' collective bargaining power and an increase in firms' market power. According to the wage-setting and price-setting framework, arrange the following events in the logical sequence that describes the impact on the labor market and income distribution.
A government, observing rising inequality alongside the growth of the 'gig economy,' enacts a policy that significantly enhances the collective bargaining power of gig workers. Assuming no other changes, which statement best evaluates the most likely outcome within the wage-setting (WS) and price-setting (PS) framework?
Reconciling Stable Unemployment with Rising Inequality
In the wage-setting and price-setting framework, when increased corporate market power and a weaker worker bargaining position (trends associated with the gig economy) occur simultaneously, the factor that most directly explains the resulting increase in income inequality is the higher ____.
Effect of the Gig Economy on the Wage-Setting Curve