Assume that in Babilonia no one is born or dies, but just spend their life eithe

Question

Assume that in Babilonia no one is born or dies, but just spend their life either out of the labor force, or in the labor force and unemployed, or employed. Assume crucially that these percentages are unchanged, year after year. Every year 1% of those out of the labor force enter the labor force and 3.5% of those unemployed leave the labor force. Assume also that every year 24% of the unemployed find jobs, while 3% of those employed lose jobs, and become unemployed.

• What are the steady-state percentages of Babilonia residents out of the labor force, in the labor force and unemployed, and employed.

Explanation / Answer

Let us have, X= employed, Y=unemployed

Hence, there is

X-3.5Y=100

3X +24Y=100

Therefore,

4X+20.5Y=200

Let X= 1, then we have 4+ 20.5Y=200

Hence,196=20.5Y

Therefore, Y= 9.6 million

And if we have Y=1, we have

4X+20.5= 200

4X=179.5

X=44.6 million

Hence the percentages are,

If X= 44.6% Y= 1%

and if X= 1%, Y= 9.6%

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