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Read 2 readings and answer 4 multiple choice questions
Berman-Bound-Griliches-QJE94.pdf
Imbens-Rubin-Sacerdote-AER01.pdf
The following is one of the main conclusions in the study of lottery winners by Imbens, Rubin and Sacerdote (AER, 2001):
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The impact of non-labor income on labor earnings cannot be estimated since an
“experiment” is impossible to undertake
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People who win the lottery increase their labor earnings to be able to pay their taxes
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Wining the lottery decreases labor earnings by about 11 percent
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People who win the lottery decrease consumption by about 11 percent
From the discussion in class of the paper by Imbens, Rubin and Sacerdote (AER, 2001), the following is a reason why it is difficult to estimate the impact of non-labor income on work:
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Non-labor income is not “exogenous”
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It is hard to motivate the policy importance of the impact of non-labor income on work
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People never truthfully report their income and hours worked in surveys
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Natural experiments and not comparable to actual social experiments
The following is not true about skill wage differentials as defined by Berman, Bound and Griliches (QJE, 1994)
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An example is the difference in wages between production and nonproduction workers
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They have been rising consistently over the last 30 years, especially during the 1980s
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An example is the difference in wages between workers who are college and high school
graduates
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They have been decreasing consistently over the last 30 years, especially during the
1980s
Which one of the following is not a plausible explanation of the observed trend in skill wage differentials during the 1980s according to Berman, Bound and Griliches (QJE, 1994)?
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There was a “defense buildup” of high-tech nature that caused an increase in demand for
skilled workers
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International competition has implied lower demand for unskilled workers
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There has been a substitution effect in the demand for labor of skilled workers
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There has been “skill-biased technological change” during that time
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