Test on Labor Economics: Migration and Job Turnover

Question 1: The present value of living in a location is best calculated by summing the annual discounted incomes one will earn in that location.

A. Yes

B. No

Explanation: When considering whether to migrate to a particular location, the present value of living in that location is best calculated by summing the annual discounted incomes one will earn there.

Question 2: According to the study materials, if the age-wage profile of immigrants has consistently increased over time across different cohorts (e.g., 1990s profile higher than 1980s, which is higher than 1970s), what might a cohort analysis used to estimate the age-wage profile of immigrants potentially reveal?

A. a horizontal age-wage profile

B. negatively selected immigration

C. a positively skewed wage distribution

D. a negative return to moving costs

Explanation: Question 11 describes a scenario where the age-wage profile of immigrants has been increasing over time for successive cohorts. If a cohort analysis is used to estimate the age-wage profile in such a situation, it is possible to find a horizontal age-wage profile as stated in the options of the study material.

Question 3: The labor market experiences job turnover primarily because workers avoid accumulating general training or education.

A. Yes

B. No

Explanation: The study materials indicate that workers might want to change jobs *after* accumulating general training or education, not because they avoid it. Other reasons for turnover include differences in worker abilities, firm amenities, and economic conditions.

Question 4: The age-earnings profile is steeper for workers who experience job separation compared to those who remain with their job.

A. Yes

B. No

Explanation: The slope of the age-earnings profile is steeper for workers who remain with their job (i.e., job stayers) compared to workers who experience job separation (i.e., quits and layoffs). Workers who experience a job separation experience a jump down in the age-earnings profile, which then must be flatter by construction.

Question 5: What is the primary reason the age-earnings profile is hypothesized to be steeper for workers who remain with their current job (job stayers) compared to those who experience job separation?

A. Workers who experience job turnover, whether quits or layoffs, are inherently less productive than job stayers.

B. Workers with longer tenure at their current firm have invested more in valuable firm-specific training.

C. Workers who experience a job separation incur significant costs for job retraining, which flattens their profile.

D. Job stayers are legally entitled to greater annual wage increases than workers who change jobs.

Explanation: According to the study materials (Question 29), the age-earnings profile is likely steeper for job stayers because 'Workers with longer tenure at their current firm have invested more in valuable firm-specific training.'