In this question, you will analyze how the labor income changes when the wage changes.
Set the output price at 0.057 in A33–A42, and give values to the wage rate running from 0.75 to 1.20 in B33-B42. Observe how the labor share changes in the value of production when the wage rate increases from 1 to 1.20 or decreases from 1 to 0.75. Contrast the cases when is smaller and greater than one. Explain this by looking at the changes in labor use in response to wage movement.
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Base
Consumption with food price increase
bi ci consumption Quantities Percent change
Food 0.088 494 561 551 –1.8
Housing 0.250 291 481 468 –2.6
Other nondurables 0.488 1,122 1,492 1,468 –1.6
Durables 0.174 209 341 333 –2.5
Source: Blanciforti, Green, and King, 1986.
Population Quarterly income
Cumulative population
Cumulative income
Poverty indices Income distribution
N y Area under Theil
(percent) (pesos) (percent) (percent) (y–y*) (y–y*)2 Lorenz curve index
Poor 11.3 147 11.3 4.7 188 35,526 448 9.3 195 20.6 10.0 140 19,479 441 8.8 219 29.4 15.5 116 13,482 416 8.1 233 37.5 21.0 102 10,432 362 7.3 278 44.9 26.8 57 3,266 345 6.2 284 51.1 31.9 51 2,646 263 5.6 304 56.7 36.8 31 934 227
Nonpoor 14.1 363 70.8 51.6 534
4.2 389 75.0 56.2 127
4.3 428 79.3 61.5 120
3.6 440 82.9 66.1 86
3.0 492 85.9 70.3 67
3.0 499 88.9 74.6 54
2.7 547 91.6 78.8 42
2.2 657 93.7 82.9 30
2.5 759 96.2 88.3 27
2.0 829 98.2 93.0 14
1.8 1,324 100.0 100.0 6
Poor H = 56.7 226 685 85,766 3,608 0.028
Nonpoor 43.3 508 0.073
All 100 348 Gini = 0.28 T = 0.136
I = 3.6 Tb = 0.080
P1 = 2.0 P2 = 0.8 Tw = 0.056 Source: Levy, 1990.
Note: Poverty line defined at 335 pesos.
1 23 45 67 89 1011 1213 14 1516 1718 1920 2122 2324 25 2627 28 2930 3132 3334 3536 3738 3940 41 4243 44 4546 4748 4950 51 5253 5455 56 5758 5960 6162 6364 6566 67 68
Table 1E.1. Production function: Technological change and factor substitutability
Parameters Simulation 1 Simulation 2
theta0 = 1 theta0 = 1.1
sigma .80
a 25.00
alpha .30
k 3.00
theta 0 1.00
theta k 1.00
theta L 1.00
-rho -.25
Variation of production with labor input
Marginal
Labor productivity
L Production of L
2.00 56.2 20.3
3.00 75.0 17.5
4.00 91.5 15.7
5.00 106.5 14.3
6.00 120.3 13.3
7.00 133.1 12.4
8.00 145.2 11.7
9.00 156.6 11.1
10.00 167.5 10.6
Optimal behavior
Factor demand and supply function
Labor Output Supply
Price Wage p/w demand supply elasticity
.037 1.00 .037 .82 28.9
.042 1.00 .042 1.23 39.5 2.7
.047 1.00 .047 1.74 50.8 2.4
.052 1.00 .052 2.32 62.5 2.2
.057 1.00 .057 2.98 74.7 2.0
.062 1.00 .062 3.71 87.0 1.9
.067 1.00 .067 4.52 99.5 1.8
.072 1.00 .072 5.39 112.0 1.7
.077 1.00 .077 6.32 124.5 1.6
.082 1.00 .082 7.32 137.0 1.5
Technology
Capital/L Output/L 3.7 35.4 2.4 32.0 1.7 29.2 1.3 27.0 1.0 25.1 .8 23.4 .7 22.0 .6 20.8 .5 19.7 .4 18.7 Return to fixed factor and income distribution
Rent to k wL/pq .084 76.4 .141 74.4 .216 72.8 .311 71.3 .425 70.0 .560 68.9 .715 67.8 .891 66.8 1.088 65.9 1.306 65.1
0 200 400 600 800 1000 1200 1400
0 20 40 60 80 100
Cumulative population (%) Quarterly income per capita
(1984 pesos)
Poverty line Gap
E F
N M
G
C
O
A 0
20 40 60 80 100
0 20 40 60 80 100
Cumulative population (%) Cumulative income (%)
B D