The Employment Relationship: Difference between revisions
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:<big>''y''=''y(he)''+ε </big> | :<big>''y''=''y(he)''+ε </big> | ||
:*Assumptions: | :*Assumptions: | ||
:*#''y''' > 0 | |||
:*#''y'''' < 0 (Note: Assumptions 1 and 2 constitute the standard assumptions for a maximization problem) | |||
:*#''h'' = # of hours worked (assuming 1 hour per worker) | |||
:*#''e'' ∈ [0,1] (Simply, ''e'' is the <nowiki> "effort" </nowiki> term and is equal to the amount per hour that a worker actually works) | |||
:*#ε is an error term with μ=0 | |||
Revision as of 02:57, 22 April 2009
The employment relationship can be basically modeled as followed:
- y=y(he)+ε
:*Assumptions:
- y' > 0
- y'' < 0 (Note: Assumptions 1 and 2 constitute the standard assumptions for a maximization problem)
- h = # of hours worked (assuming 1 hour per worker)
- e ∈ [0,1] (Simply, e is the "effort" term and is equal to the amount per hour that a worker actually works)
- ε is an error term with μ=0
