Problem
Describe how each of the following affects equilibrium employment and the wage in the Shapiro-Stieglitz model:
(a) An increase in workers' discount rate, ρ.
(b) An increase in the job breakup rate, b.
(c) A positive multiplicative shock to the production function (that is, suppose the production function is AF (L), and considers an increase in A).
(d) An increase in the size of the labor force, L.