In an economic model designed to study how different groups of people respond to a future pay raise, all individuals in the model are assumed to experience the exact same income path: a period of low income, followed by the announcement of a future raise, and then the actual increase in income. What is the primary analytical advantage of assuming this uniform income path for everyone in the model?
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In an economic model designed to study how different groups of people respond to a future pay raise, all individuals in the model are assumed to experience the exact same income path: a period of low income, followed by the announcement of a future raise, and then the actual increase in income. What is the primary analytical advantage of assuming this uniform income path for everyone in the model?
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