## Quantitative Problems

 1. A large number of studies indicate that the reservation wage declines with the length of the unemployment spell. What are some of the factors that might explain this behavior? 2. It is often suggested that unemployed workers have lower search costs than employed workers. Is this plausible? What does this imply for workers' optimal search strategies? 3. What happens to the typical unemployed worker's reservation wage following an increase in unemployment benefits? What is the effect of this change on the unemployment rate? 4. Discuss the implications of the explosive growth in the use of the Internet as a job-finding tool. In this light, explain the role played by niche job-search sites such as The Ladders, which "Brings you real, open \$100K + jobs across every industry and sector." 5. What are meant by informal job search methods and why are they seemingly so effective? What are some the implications of the use of these methods for minority workers vis-á-vis majority workers? 6. Suppose the facts are as follows: wage offers are distributed uniformly over the interval [0, 100]; r = 1; δ = 0; and c = 30.5. What is the worker's reservation wage w*? Suppose that the government fully subsidizes the costs of search, so c = 0. What is the worker's reservation wage now? Since search is "free," why doesn't the worker seek out the highest wage possible, w* = \$100? (Hint: A uniform distribution is one in which all of the offers in the interval [0,100] are equally likely. In this case, it can be shown E(w|w*) = 1/2 · (w* + 100) and F(w) = w/100. [Recall E(w|w*) is the expected wage conditional on drawing one that exceeds w*, and F(w*) is the probability of drawing a wage that is less than w*.])