diff --git a/lectures/equalizing_difference.md b/lectures/equalizing_difference.md index 6a756af9..c65bbf9a 100644 --- a/lectures/equalizing_difference.md +++ b/lectures/equalizing_difference.md @@ -31,7 +31,7 @@ Our presentation is "incomplete" in the sense that it is based on a single equa This ''equalizing difference'' equation determines a college-high-school wage ratio that equalizes present values of a high school educated worker and a college educated worker. -The idea is that lifetime earnings somehow adjust to make a new high school worker indifferent between going to college and not going to college but instead going to work immmediately. +The idea is that lifetime earnings somehow adjust to make a new high school worker indifferent between going to college and not going to college but instead going to work immediately. (The job of the "other equations" in a more complete model would be to describe what adjusts to bring about this outcome.) @@ -136,7 +136,7 @@ $$ We suppose that $R, \gamma_h, \gamma_c, T$ and also $w_0^h$ are fixed parameters. We start by noting that the pure equalizing difference model asserts that the college-high-school wage gap $\phi$ solves an -"equalizing" equation that sets the present value not going to college equal to the present value of going go college: +"equalizing" equation that sets the present value not going to college equal to the present value of going to college: $$ @@ -257,7 +257,7 @@ plt.ylabel(r'wage gap') plt.show() ``` -Notice how the intitial wage gap falls when the rate of growth $\gamma_c$ of college wages rises. +Notice how the initial wage gap falls when the rate of growth $\gamma_c$ of college wages rises. The wage gap falls to "equalize" the present values of the two types of career, one as a high school worker, the other as a college worker. @@ -298,7 +298,7 @@ What we used to call the college, high school wage gap $\phi$ now becomes the ra of a successful entrepreneur's earnings to a worker's earnings. We'll find that as $\pi$ decreases, $\phi$ increases, indicating that the riskier it is to -be an entrepreuner, the higher must be the reward for a successful project. +be an entrepreneur, the higher must be the reward for a successful project. Now let's adopt the entrepreneur-worker interpretation of our model @@ -427,7 +427,7 @@ Now let's compute $\frac{\partial \phi}{\partial D}$ and then evaluate it at the Thus, as with our earlier graph, we find that raising $R$ increases the initial college wage premium $\phi$. -Compute $\frac{\partial \phi}{\partial T}$ and evaluate it a default parameters +Compute $\frac{\partial \phi}{\partial T}$ and evaluate it at default parameters ```{code-cell} ipython3 ϕ_T = ϕ(D, γ_h, γ_c, R, T, w_h0).diff(T)