At 01:22 PM 10/18/01 -0500, you wrote: >Peter, Jim, or anyone - > >In the NK lit, why doesn't the change in productivity associated with >the higher wage cause a shift in the Ls curve? > >Mat
I'm no expert, but the change in productivity associated with the higher wage refers to the demand-for-labor curve. It's either a movement along the curve (the Marginal Product of Labor must be higher to justify hiring a more expensive worker) or a shift of the curve (the "efficiency" wage hypothesis, in which both the AP and MP of labor rise because of greater worker motivation, etc.) On the supply side, a higher wage would evoke a higher quantity of labor supplied (a movement along the supply curve). If we're talking about the economy as a whole, the increase in quantity of labor supplied would be nil (at least in reasonable versions of NC economics). It would not shift the supply-of-labor curve. Of course, I don't believe in the theory presented above. Some other time, I'll give my take on this issue. Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~jdevine
