EC120 Chapter Notes - Chapter 19: Human Capital, Market Power, Efficiency Wage
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EC120 Full Course Notes
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Compensating diferentials: a diference in wages that arises to ofset the nonmonetary characteristics of diferent jobs. Paying more for jobs that are less appealing, or to compensate for job characteristics that are more unsafe. Ex: paying night-shift workers in a factory more than day-time workers to compensate for their inconvenient work shift. Human capital: the accumulation of investments in people, such as education and on the job training. Education is the most important form of human capital! Generally, workers with more human capital earn higher wages than those without. Natural talent often plays a role in determining wages. Ex: an nhl hockey player and one in a minor league, the nhl player likely made it in the team due to their naturally high skill at the game. Those who put in efort into their jobs and work hard generally earn higher wages than those who do not. Chance can sometimes be the reason for a diference in wages.
