Ability Bias Can Arise When Estimating Compensating Wage Differentials Associated

question 18

Multiple Choice

Ability bias can arise when estimating compensating wage differentials associated with various job characteristics. What is ability bias in this context?

• A) Low-skilled workers are likely to have low wages but good job amenities.
• B) High-skilled workers are likely to have high wages but poor job amenities.
• C) High-skilled workers are likely to have lower wages than unskilled workers but to have better job amenities.
• D) High-skilled workers are likely to have higher wages than unskilled workers but to have worse job amenities.
• E) High-skilled workers are likely to have higher wages than unskilled workers, but they are also likely to trade some of their higher wages for better job amenities.

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Definitions:

Relative Magnitude

The comparison of the size, extent, or importance of something in relation to another.

Difference Threshold

The least variation in stimulation that an individual is able to recognize 50% of the occasions, commonly termed as the just noticeable difference (JND).

Marginal Intensity

Marginal intensity refers to the change in the level of intensity or satisfaction gained from consuming an additional unit of a resource or performing an additional unit of activity.

Relative Magnitude

The perception or measurement of the size, duration, or intensity of an object or event in comparison to another.