In determining wages, ability, effort, and chance
A)probably play no role whatsoever.
B)play a role, but their importance is hard to gauge since ability, effort, and chance are hard to measure.
C)play a role, and that role is fully captured in easy-to-measure factors such as human capital and age.
D)play a role, and it is fully explained within the context of compensating differentials.

Question

Quizplus · Accepted Answer

Ability, effort, and chance are all important factors in determining wages, but they are difficult to measure objectively. Instead, economists often rely on proxies such as education and experience (which capture parts of ability and effort) to estimate wage differentials. Compensating differentials are another way to explain wage differences, but they typically only capture observable factors like job risk and working conditions, and may not fully capture differences in ability or effort. Therefore, while ability, effort, and chance do play a role in determining wages, they are not easy to measure or fully capture in existing wage models.

In Determining Wages, Ability, Effort, and Chance