7 The added worker effect can be explained in terms of the i

7. \"The added worker effect can be explained in terms of the income effect, while the discouraged worker effect is based on the substitution effect.\" Do you agree?

Solution

ans.....

yes the added worker effect is based on the reduction in the partner\'s non-wage income.The discouraged worker effect can be explained by a reduction in the expected wage rate (the potential wage adjusted for the reduced probability of finding a job).