Reference no: EM131725193

10% of the population are low-productivity workers and 90% of the population are high-productivity workers. The present value of lifetime productivity for low-productivity workers is $150,000 and the present value of lifetime productivity for high-productivity workers is $200,000. It costs $30,000 for a low-productivity worker to go to school.

a) Calculate how much the employer would pay in a pooling equilibrium?

b) In a separating equilibrium, the rm is requiring that all workers go to 4 years of school. Verify that the low types will not go to school. Calculate a range of school costs for high types such that this is a true equilibrium.