Economics 381
Summer 1991
D. Maki
                     FINAL EXAMINATION

Instructions:  Answer any four of the following six
questions.  Questions are equally weighted.  This is a
closed book examination.  Total time allowed:  3 hours.

1.  What are the factors that are commonly assumed to affect
the "natural rate" of unemployment (or NAIRU)?  Over the
last 20 years or so, what have been the primary impacts of
variations in these factors on the Canadian "natural rate"?

2.  Frictional unemployment is generally assumed to depend
on the job search behaviour of workers.  Briefly outline a
theory of job search which requires workers to have a
"minimum acceptance wage" (or reservation wage).  What is
the main problem with such models, and how have alternative
theoretical models dealt with this?  Explain.

3.   Given two types of workers (A and B), what difference
does it make whether we assume (i) that employers have a
taste for discrimination against type B workers, (ii) type A
workers have a taste for discrimination against type B
workers, but workers are homogeneous, or (iii) that there
are skilled and unskilled workers, and only skilled type A
workers have a taste for discrimination against type B
workers?  Explain.

4.   What are the advantages and disadvantages of Negative
Income Tax (NIT) plans as a means of alleviating poverty?
Explain how the income and substitution effects of these
plans affect labour supply.  Is it possible that a higher
tax rate under a NIT plan could lead to a smaller labour
supply effect for the population as a whole?  Explain.

5.   Trade unions are generally assumed to increase the wage
rates of union members.  What effects have been suggested on
the wages of other workers?  Explain.  What effects of
unions have been suggested on productivity levels and
productivity growth?  What difference does it make if one
discusses output per person versus total factor
productivity?  Explain.

6.   Many types of wage differentials have been noted -
occupational differentials, gender differentials and public-
private differentials, for example.  Discuss the influence
of compensating variation and supply-demand conditions on
occupational differentials.  Could this same discussion be
easily adapted to the case of gender differentials and
public-provate differentials?  Explain briefly.