55% of the population are low-productivity workers and 45% of the population are high-productivity workers.The present value of life time productivity forlow-productivity workers is $175,000 and the present value of life time productivity for high-productivity workers is $225,000. School would cost $15,000 for the high-productivity workers and $25,000 for the low-productivity workers.
a) An employer could simply pay all types the same amount. How much would an employer pay?
b) High-productivity workers would like to signal to employers that they are high-productivity. In order to be a true signal, there are two requirements. What are they?
c) Calculate a range of how many years of school an employer would require.
d) Briey explain the difference between a separating and a pooling equilibrium.