1. Review Pham Hoang Van’s model by focusing on the following:
(i) What are the main assumptions?
(ii) Draw the labour supply curve and explain its “non-linear” shape.
(iii) Draw the labour demand curve and explain its slope.
2. Is this a case of a unique equilibrium? Provide a graphical discussion of your answer.
3. Why is there an intergenerational transmission of the child labour problem, and how does it work?
Consider the following Table as in Freeman (2009)
1. To interpret some of these results you may want to consider a diagram with labour demand and labour supply and the imposition of a minimum wage law in the covered sector. Use this diagram to describe the wage effect and the employment effect of such a policy in the covered sector.
2. Write down the formula for the wage elasticity of labour demand. Use a diagram to explain how important this is to explain the employment effect of a minimum wage law.
3. Now consider the effects in the uncovered sector of a minimum wage imposed on the covered sector. How can the wage effect be positive?
4. Suppose that the labour supply in the uncovered sector is perfectly elastic. What kind of wage and employment effect will you have in the uncovered sector in such a case?
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