Answer to Question #98095 in Macroeconomics for annie

Question

Recently government of Turkey is willing to increase the demand for labor in the country. Write a
policy the government can use for this aim. Explain how according to neoclassical labor market
model, this policy will increase the demand. (Or alternatively, explain in which way neoclassical
model fail to capture the effect of the policy you mention.)

Answer 1

According to the Neoclassical economic theory the main forces, that determine all changes on the labour market are wage ant migration. International migration is caused by the differences in wage levels between countries and labour markets. If wage differences were eliminated, labour migration would stop according to this theory. So, basing on Neoclassical economics to increase the demand for labor in the country the government need to change the level of wages and system of payment. Also, they can stimulate migration of workers for low payig positions.