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File: 1608528408081.png (145.71 KB, 740x697, duflo.png)

 No.4637

I consider myself fairly intelligent when it comes to reading papers, but I'm really struggling with this one.

This paper is about an education program in Indonesia and the long term effects on the job market. I'm used to studying more sociological papers, but this also includes lots of statistical analysis and words like function and regression that I don't understand.

Also, I've read this passage 10 times and don't understand it

>The production function in the formal sector exhibits constant returns to physical and human capital combined. The fact that the increase in the share of educated workers led to a movement of workers from the informal to the formal sector indicates that the elasticity of substitution between labor and land in the informal sector is smaller than the elasticity of substitution between labor and capital in the formal sector.


Can anyone help me? If I want to understand this stuff, what kind of courses should I be looking at?
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 No.4638

I'm not a student but I read shit like that occasionally. The author is not making up a private jargon. The language is utterly generic econ stuff. So I don't understand how you can fail to understand it. You can and should just look up the terms you don't understand.

Elasticity in economics means flexibility. If chocolate pudding varies a lot in price but I keep on buying the same physical amount month after month, then talking in Economese one would say that my demand for chocolate pudding is inelastic. Inelastic substitution between two things just means that having more of thing X does not help much with a lack of thing Y. (It's common in contemporary economics to not assume a general substitution rate like 5 X make up for 2 Y no matter how many units you have of each, rather it is usually assumed that the ability of the things to work as substitutes for each other gets worse the more you get away from the current proportions. This is not empirically derived, but based on the optimistic assumption that we are close to acting in a very sensible way about things like that.)

Constant returns means that when you are cooking something and you multiply the amount of each ingredient by the same number, the output of what you are cooking also gets multiplied by the same number. If at least one of your inputs cannot be varied like you'd want to, economists usually assume that you can't have constant returns. This is obvious in the cooking example if you really rigorously just follow one recipe with no alternative inputs allowed. Economists usually assume that you can do some substitution still, so you still have bigger output than before, but the growth is less than proportional to the inputs that you multiplied, since you didn't multiply everything. Again, the regular assumption is that prior to your attempt at changing the output quantity you had sensible proportions.
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 No.4640

>>4638
>>4638
>The author is not making up a private jargon

I never said they were. I said that I needed help understanding it.

Thanks for the explanation.The problem with looking stuff up on google is that they rarely give a direct answer.
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 No.4641

For understanding neoclassical economics - which in turn is necessary to learning contemporary heterodox economics, because so much of the jargon is shared - https://www.core-econ.org/ may be useful. It's free, designed for students, and by mainstream econ standards avoids a lot of ideological mystification.
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 No.4642

>>4638
Sorry, I read your exaplantion, thanks for assisting, but I still can't wrap my head around this idea, I think I'm starting to get it…

> the elasticity of substitution between labor and land in the informal sector is smaller than the elasticity of substitution between labor and capital in the formal sector.


by saying the elasticity of substitution between labor and land is relatively low, does this mean that because land is relatively fixed, we cannot simply import many workers to match the productivity, because at a certain point, we need the land to work on?

And then on the other hand, in the formal sector, the elasticity of substitution between labour and capital is relatively higher, because you can substitute labour (i.e. people) for capital (and vice versa, i'm not sure if this is implied to go both ways or not??), and still maintain productivity? So are we saying that the formal sector is more equipped to deal with influxes of workers (or in Marxist terms, variable capital)?
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 No.4654

>>4642
Yes. Where the author speaks of capital in the formal sector, he is thinking mostly of machinery and he is assuming that when the conditions of business change in the formal sector it's not that hard to change the mix of people and machinery to get something close to an optimal mix, unlike with land.

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