In the one-sided search model, the welfare of an employed worker
A) is convex in the real wage.
B) decreases with the real wage.
C) in a concave function of the real wage.
D) increases with employment insurance benefits.
E) is lower than the welfare of an unemployed workers.

Question

Quizplus · Accepted Answer

In the one-sided search model, the welfare of an employed worker is typically a concave function of the real wage because the marginal utility of income decreases as income increases.

In the One-Sided Search Model, the Welfare of an Employed