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The WS-PS Model as a Model of Income Distribution
Formula for the Wage Share
The wage share is the fraction of a worker's total output (λ) that is paid as a real wage (w). This share is determined by the firm's profit share (σ), which in turn depends on market competition. The relationship is defined by the formula: . This equation shows that the wage share is what remains of the output per worker after the firm's profit share is accounted for.
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Economics
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Introduction to Macroeconomics Course
Ch.2 Unemployment, wages, and inequality: Supply-side policies and institutions - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
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Assumptions for Modeling Income Distribution in the WS-PS Model
Example Scenario for WS-PS Income Distribution Model
Determinants of Equilibrium Employment and Income Distribution
Limitation of the Lorenz Curve for Real Wage Analysis
In a macroeconomic framework where firms determine prices by adding a markup over their labor costs, what is the direct implication of an increase in this markup for the distribution of the economy's total output?
Explaining Changes in Income Distribution
Impact of Market Competition on Income Distribution
The Wage-Profit Trade-off
In an economic framework where firms set prices as a markup over labor costs and workers' wage demands depend on labor market conditions, a sustained increase in workers' bargaining power, with no change in the firms' markup, will result in a permanent increase in the share of national income going to labor.
In a macroeconomic model where total output per worker is divided between wages and profits, match each component of the model to its corresponding role in determining income distribution.
A government introduces new regulations that significantly decrease the level of competition in the product market. Within a framework where firms set prices and workers set wages, arrange the following outcomes in the logical order they would occur, leading to a new distribution of national income.
In an economic model where firms set prices as a markup over labor costs, the total value added per worker is divided into two main components: the real wage that goes to the worker, and the real ____ that is retained by the firm's owners.
Evaluating Policies for Income Distribution
Consider an economy where firms determine the prices of their goods by applying a consistent percentage markup over their labor costs. Workers' wage demands are influenced by the state of the labor market. If the government enacts a policy that substantially increases the value and duration of unemployment benefits, what is the most probable long-term consequence for the distribution of the economy's total income?
Visualizing Income Distribution with the WS-PS Model and Lorenz Curve
Assumptions of the Simple WS-PS Income Distribution Model
Illustrative Economy for the WS-PS Income Distribution Model
Formula for the Wage Share
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Analyzing Changes in Real Wages
In a specific economy, new government policies lead to a significant increase in competition among firms. Assuming the output per worker remains constant, what is the most likely impact on the share of output paid to workers as wages?
Calculating the Wage Share
True or False: If a firm successfully increases its profit share from 20% to 25%, while the output per worker remains constant, the real wage paid to workers must also increase.