Question
1.We have a two-period model of employment and training.The market is perfectly competitive.Assume that the discount rate is 5%.All workers are identical and have a
1.We have a two-period model of employment and training.The market is perfectly competitive.Assume that the discount rate is 5%.All workers are identical and have a value of marginal product of $50,000 in the first period.In the second period, the worker has become more productive and has a VMP of $70,000.However, if the worker also receives general training they have a VMP of $80,000 in the second period.General training costs the firm $8,000.
a.What will equilibrium wages be in each period?
b.Will firms provide general training?
c.Repeat parts a. and b. but assume that general training costs the firm $20,000 instead.
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