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Labor Productivity and Winner-Take-All Market

I am having difficulty generating responses and ideas to the questions in this passage of 'Labour Markets and Labour Unions: Case Study, Winner-Take-All Labor Markets (attached)
- What characterizes a winner-take-all labor market? Offer some reasons why corporate heads now earn much more than they did in the 1970s.


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You should make your argument based on the marginal principle. Firms are willing to pay for high price for productive labor as long as the marginal benefit of hiring that labor is higher than the marginal cost of hiring the labor. In other words, the increment in benefit is greater ...

Solution Summary

This solution discusses why a firm is willing to pay high salary to its corporate head if he/she is able to bring more revenue to the firm.