Libertad Gonzalez and
Thijs van Rens
Universitat
Pompeu Fabra
Graduate
Program in Economics
Labor
Economics
Winter 2007
Course objectives
Labor economics, the study of labor markets, is a field populated by both micro- and
macroeconomists. Broadly speaking, the questions we try to answer are
"What determines differences in wages or labor
supply between different people?" or "What determines differences in
wages and labor supply between recessions and booms?". Traditionally, these questions have been approached
with very different methods: largely data-driven (non-structural) microeconometrics on the one hand, and theory or
model-based estimation on the other. But these differences are getting smaller
and as a labor economist you need to be (somewhat)
familiar with both views.
In
this course, we try to give you an overview of the field of labor
economics, with a strong emphasis on theoretically motivated empirics or
data-driven theory. We also tried to select topics that are at the edge of
current research interests, so that you can start thinking about your own
research topics. Since this is a second year Ph.D. course, the aim is not only
to introduce you to the field, but also to prepare you to do your own research.
For that reason, you will be evaluated not only in an exam, but also based on a
research project that you present in class and write up as a paper (proposal).
Grading
In
order to give you time to work on your project, we will try to concentrate the
'learning' part of the course in the first five weeks. This is reflected in the
grading scheme. The first half will be concluded with a midterm exam, which
counts for 40% of your final grade. The second half is evaluated on the basis
of a shorter final exam early in the exam period (20%) and your project, due at
the end of the exam period (40%). The grade for the project will be determined
by your presentation in the last week of class as well as the final draft.
Depending on the topic, your project is graded by Libertad or Thijs, but of
course we will make sure that you neither benefit nor suffer from your choice.
Research project
Your
project may be either a critical evaluation of an existing paper related to the
material covered in class or a research proposal for a paper of your own. In
the first case, the paper should consist of a detailed summary of the article
you are discussing, a critical evaluation of that article in the style of a
referee report, plus a replication or extension of the results. If you decide
to write a research proposal, you need to describe the contribution of your
paper with respect to the literature, provide a detailed and precise
description of the question you are planning to answer, plus show some
preliminary results. In either case, the results may be empirical (cross-tabs,
regressions) or theoretical (simulations, proofs). You will present your
project in the last week of class, so that we can give you feedback on your
idea.
Contacts
Libertad,
room 20.1E78, libertad.gonzalez@upf.edu, www.econ.upf.edu/~gonzalez/
Thijs,
room 20.1E32, thijs.vanrens@upf.edu, www.thijsvanrens.com
This
syllabus and other relevant information will be posted on web at http://www.thijsvanrens.com/labor.
Reading List
1. Introduction (Lecture 1)
* Cahuc & Zylberberg, Labour Economics, 2004 (Introduction).
Ehrenberg & Smith, Modern Labor Economics, 2003 (Chapters 1
& 2).
Thomson, A Guide for the Young Economist, 2001 (Chapter 1).
Wooldridge, Introductory Econometrics, 2003 (Chapter 19).
2. The Roy Model (Lectures 2,
3)
* A. Roy, “Some Thoughts on the
Distribution of Earnings.”
* J. Heckman and B. Honore,
“The Empirical Content of the Roy Model.” Econometrica, 58, pp. 1121-49, 1990.
J. Heckman and G. Sedlacek,
“Heterogeneity, Aggregation, and Market Wage Fluctuations: An Empirical Model
of Self-Selection in the Labor Force,” JPE
1985.
G. Borjas,
“Self-Selection and the Earnings of Immigrants.” American
Economic Review, 77.4 (September), 5531-53, 1987.
G. Borjas, “The
Wage Structure and the Sorting of Workers into the Public Sector.” NBER
Working Paper, No. 9313, 2000.
D. Neal and S. Rosen, “Theories of Labor Earnings” in the Handbook of Income
Distribution, A.B. Atkinson and F. Bourguignon, eds.
G. Borjas, “The
Economics of Immigration.” Journal of Economic Literature,
Vol. 32.4 (December), 1667-1717, 1994.
R. Friedberg, “You Can´t Take It With You? Immigrant Assimilation and the
Portability of Human Capital.” Journal of Labor Economics, 18.2, 221-251, 2000.
3. Compensating Differentials (Lectures 4, 5)
(*) Cahuc & Zylberberg (2004) Labor
Economics, Chapter 5.
(*) Ehrenberg & Smith (2003) Modern Labor Economics, Chapter 8.
* S. Rosen (1986). “The
Theory of Equalizing Differences” in the Handbook of Labor
Economics, vol. 1, pp 641-92.
S. Rosen (1974). “Hedonic Prices and
Implicit Markets: Product Differentiation in Pure Competition” Journal of
Political Economy, Vol. 82.1 (January-February), 34-55.
* J. Roback (1982) “Wages, Rent and the Quality of Life”. Journal
of Political Economy. Vol. 90.6 (December) 1257-78.
* T. Bergstrom (1986) "Soldiers of
Fortune?" in W. Heller, R. Starr, and D. Starrett
(eds.), Equilibrium Analysis: Essays in Honor of
K. J. Arrow, Vol II.
J. Abowd and O. Ashenfelter (1981) “Temporary Layoffs, Anticipated
Unemployment and Compensating Wage Differentials” in
D. Autor, J.
Donohue, and S. Schwab (2002). “The Cost of
Wrongful-Discharge Laws” NBER Working Paper No. 9425.
M. Bertrand, E. Duflo,
and S. Mullainathan (2002). “How Much Should We Trust
Differences-in Differences Estimates?” NBER Working Paper No.
8841.
C. Brown (1980). “Equalizing
Differences in the Labor Market.” Quarterly Journal of Economics, vol. 1, pp 641-92.
G. Duncan and B. Holmlund
(1983) “Was Adam Smith Right After All? Another Test of the
Theory of Compensating Differentials.” Journal of Labor Economics Vol. 1.4 (October) 366-79.
I. Ekeland, J.
Heckman, and L. Nesheim (2003). “Identification
and Estimation of Hedonic Models.” NBER Working Paper
No. 9910.
P. Fishback and
S. Kantor (1995). “Did Workers Pay for the Passage of Workers´ Compensation
Laws?” Quarterly Journal of Economics, Vol. 110.3
(August), 713-42.
J. Gruber (1994). “The
Incidence of Mandated Maternity Benefits.” American
Economic Review, Vol. 84.3 (June), 622-41.
J. Gyourko and J.
Tracy (1989) "The Importance of Local Fiscal Conditions in Analyzing Local Labor Market
Conditions." Journal of Political Economy,
pp.1208-31.
D. Hammermesh
(1999). “Changing Inequality in Markets for Workplace Amenities” Quarterly
Journal of Economics, 114.4 (November), 1085-1123.
S. Kahn and K. Lang (1988). “Efficiency Estimation of Structural Hedonic Systems” International
Economic Review, Vol. 29.1 (February), 157-66.
M. R. Killingsworth (1987) "Heterogeneous Preferences,
Compensating Wage Differentials, and Comparable Worth." Quarterly
Journal of Economics, Nov.: 727-742.
K. Murphy and R. Topel
(1987). “Unemployment, Risk, and Earnings: Testing for Equalizing Differences
in the Labor Market” in K. Lang and J. Leonard eds., Unemployment
and the Structure of Labor Markets.
R. Smith (1979) "Compensating Wage
Differentials and Public Policy: A Review." Industrial and Labor Relations Review, April 1979, pp. 339-353.
J. Stiglitz
(1987) "The Causes and Consequences of the Dependence of Quality on
Price," Journal of Economic Literature.
Thaler, R. and
Topel, R. (1984)
"Equilibrium Earnings, Turnover, and Unemployment: New Evidence." Journal
of Labor Economics, pp. 500-22.
E. Villanueva (2005). "Compensating Wage
Differentials and Voluntary Job Changes: Evidence from Germany."
Mimeo, Universitat Pompeu
Fabra.
Viscusi, W. Kip and
Michael J. Moore (1987) "Workers' Compensation: Wage Effects, Benefit
Inadequacies, and the Value of Health Losses", The
Review of Economics and Statistics, 69:249-261.
S. Woodbury (1983) "Substitution Between Wage and Nonwage Benefits." American
Economic Review.
4. Discrimination (Lecture 6 and 7)
(*) Cahuc & Zylberberg (2004) Labor
Economics, Chapter 5 (sections 2.1, 3.2, 4.2)
(*) Ehrenberg & Smith (2003) Modern Labor Economics, Chapter 12.
* J. Altonji and R. Blank (1999) “Race and Gender in the Labor Market” in O. Ashenfelter
and D. Card, eds. Handbook of Labor Economics,
vol. 3C
* J. Altonji and
C. R. Pierret (2001) “Employer Learning and
Statistical Discrimination” QJE 116(1): 313-350.
K. Arrow (1972) "Models
of Discrimination," and "Some Mathematical Models of Race in
the Labor Market," in A.H. Pascal (ed.), Racial
Discrimination in Economic Life.
Ashenfelter, O. and
(*) G. Becker, The
Economics of Discrimination, 1971.
(*) M. Bertrand and
G. Borjas and S.
G. Bronars, "Consumer Discrimination and
Self-Employment", JPE 97 no. 3 (June 1989): 581-605.
G. Cain (1987) "The Economic Analysis
of Labor Market Discrimination: A Survey", in Handbook
of Labor Economics.
1987, vol. 1, pages 693-781.
G. Cain and D Ainger
(1977) “Statistical Theories of Discrimination” Industrial and Labor Relations Review,
M. Killingsworth
(1990) The Economics of Comparable Worth
(Upjohn Institute).
(*) S. Levitt (2004) "Testing Theories
Of Discrimination: Evidence From Weakest Link."
Journal of Law and Economics
47(2).
Lundberg, S. and R.
Startz (1983) "Private Discrimination and Social
Intervention in Competitive Labor Markets," American
Economic Review, June.
P. Riach and J.
Rich (2002) “Field Experiments of Discrimination in the Market Place” Economic
Journal, 112 (November) F480-F518.
J. Smith and F. Welch (1986) Closing the
Gap, Rand Corp.
Black/White
Differences
J. Donohue and J. Heckman (1991)
“Continuous Versus Episodic Change: The Impact of Civil Rights Policy on the
Economic Status of Blacks” JEL (December), 1603-42.
C. Juhn, K. M.
Murphy, and B. Pierce (1989) "Accounting for the Slowdown in Black-White
Wage Convergence", in Workers and Their Wages, Marvin Kosters, Ed.
G. Loury (2003)
“Racial Stigma : Toward a New Paradigm for
Discrimination Theory” AER (May) 334-7.
D. Neal and W. Johnson (1996) “The Role of
Premarket Factors in Black-White Wage Differences” Journal of Political
Economy 104 (October), 869-95.
J. O'Neill (1990) "The Role of Human
Capital in Earnings Diferences Between
Black and White Men", Joural of Economic
Perspectives, 4(4): 25-45.
Evaluating
Anti-Discrimination Policies
S. Coate and G. Loury (1993) "Will Affirmative-Action Policies
Eliminate Negative Stereotypes?", AER
83(5): 1220-1240.
R. Ehrenberg (1989) "Econometric
Analyses of the Empirical Consequences of Comparable Worth: What have we
learned?", in Comparable Worth: Analyses and
Evidence. (eds.) M. A. Hill and M. R. Killingsworth, pp. 90-107, ILR Press.
(*) R. Fryer and G. Loury
(2005) “Affirmative Action and Its Mythology” Journal of Economic
Perspectives, Summer 2005.
H. Holzer and D. Newmark (2000), “Assessing Affirmative Action” JEL
38 (Sept) 483-568.
G. Johnson and G. Solon
(1986) "Estimates of the Direct Effects of Comparable Worth Policy",
AER
J. Leonard (1984) “The Impact of
Affirmative Action on Employment” JOLE 2 (October).
Male/Female
Differences
F. Blau and L.
Kahn, "The Gender Earnings Gap: Some International Evidence", NBER
4224 (December 1992)
F. Blau and L.
Kahn (2000), “Gender Differences in Pay” JEP 14 (Fall) 75-99.
C. Goldin (1986)
“Monitoring Costs and Occupational Segregation by the Sexes: An Historical
Analysis”, Journal of Labor Economics.
C. Goldin (1990) Understanding
the Gender Gap.
C. Goldin and L.
Katz (2002) “The Power of the Pill: Oral Contraceptives and Women´s Career and
Marriage Decisions”, Journal of Political Economy 110 (August 730-70.
(*) C. Goldin and
C. Rouse (2000) “Orchestrating Impartiality: The impact of ‘blind’ auditions on
female musicians” AER 90: 715-736.
J. O’Neil (2003) “The Gender Gap in Wages,
circa 2000” AER 93 (May), 309-14.
5. Employment fluctuations (lectures
8 – 12)
* Richard Rogerson, Robert Shimer and
Randall Wright (2005). Search Theoretic Models of the Labor
Market. Journal of Economic Literature, 43
(4): 959-988.
Christopher Pissarides
(2000). Equilibrium Unemployment Theory, 2nd
edition.
* Steven J. Davis,
John C. Haltiwanger, and Scott Schuh
(1997).
Basic Facts about Job Creation and Destruction, chapter 2 in Job Creation and Destruction,
Davis and Haltiwanger (1990). Gross Job Creation and Destruction:
Microeconomic Evidence and Macroeconomic Implications, NBER Macro annual.
Davis and Haltiwanger (1992). Gross Job Creation, Gross Job
Destruction and Employment Reallocation, Quarterly
Journal of Economics.
Steven J. Davis and
John Haltiwanger (1999). On the Driving
Forces behind Cyclical Movements in Employment and Job Reallocation, American Economic Review, vol. 89(5),
pp.1234-1258.
* Mortensen, Dale T. and Christopher A. Pissarides (1994). Job Creation and Job
Destruction in the Theory of Unemployment, Review
of Economic Studies, 61(3), pp.397-415.
* Cole, Harold L. and Richard Rogerson (1999). Can the Mortensen-Pissarides
Matching Model Match the Business-Cycle Facts? International Economic Review, 40(4),
pp.933-959.
Pissarides (1992). Loss of Skill During Unemployment and the
Persistence of Employment Shocks, Quarterly
Journal of Economics, 107(4), pp. 1371-1391.
Hall, Robert E. (1995). Lost
Jobs. Brookings
Papers on Economic Activity, 1995(1), pp.221-256.
Michael J. Pries (2004). Persistence of Employment Fluctuations: A Model
of Recurring Job Loss, Review of Economic
Studies, 71 (1), 193–215.
* Shimer (2006). Reassessing the Ins and Outs of Unemployment, mimeo,
* Robert Shimer
(2005). The Cyclical Behavior of Equilibrium
Unemployment and Vacancies, American
Economic Review, 95(1): 25-49.
Shigeru Fujita and Garey Ramey (2006). The Cyclicality of Job Loss and
Hiring,
Shigeru Fujita and Garey Ramey (2007). Reassessing the Shimer
Facts,
Robert E. Hall (2005). Job Loss, job
Finding, and Unemployment in the U.S. Economy over the Past Fifty Years, NBER Macro Annual.
Steve J. Davis (2005). Comments
on “Job Loss, job Finding, and Unemployment in the U.S. Economy over the Past
Fifty Years” by Robert E. Hall, NBER
Macro Annual.
* Robert E. Hall (2005). Employment
Fluctuations with Equilibrium Wage Stickiness, American Economic Review, vol. 95(1), pp.50-65.
* Shimer (2004). The Consequences of Rigid Wages in Search Models, Journal of the European Economic Association.
6. Earnings inequality I: skill-biased technological
change (Lectures
13, 14)
* Cahuc & Zylberberg, Chapter 10.2.
* Ehrenberg & Smith, Chapter 14.
Acemoglu, D., “Technical change, inequality, and the labor market.” Journal
of Economic Literature, 2002.
(*) Autor, D., L.
Katz, and A. Krueger, “Computing Inequality: Have Computers Changed the Labor Market?” QJE 1998.
Autor, D., L. Katz, and
M. Kearney, “The Polarization of the US Labor
Market”, presented at the 2006 ASSA Meetings,
Berman, E., J. Bound and S. Machin, “Implications of skill-biased technological change:
International evidence” QJE 1998.
J. Bound and G. Johnson, "Changes in
the Structure of Wages During the 1980's: An
Evaluation of Alternative Explanations.” AER, 1992.
(*) Card, D. and J. DiNardo,
“Skill biased technological change and rising wage inequality: Some problems
and puzzles” Journal of Labor Economics, vol.
20, 2002.
DiNardo, Fortin and
Lemieux, “Labor Market Institutions and the
Distributions of Wages, 1973-1991: A Semiparametric
Approach” Econometrica, 1996.
DiNardo, J. and S. Pischke, “The Returns to Computer Use Revisited: Have
Pencils Changed the Wage Structure too?” Quarterly Journal
of Economics, 1997.
Gottschalk, P. and
T. Smeeding, “Cross national comparisons of earnings
and income inequality” Journal of Economic
Literature, 1997.
* C. Juhn, K.
Murphy, and B. Pierce, "Wage Inequality and the Rise in Returns to Skill.," JPE 1993.
* L. Katz and D. Autor, “Changes in the Wage Structure and Earnings
Inequality,” Handbook of Labor Economics,
1999.
* L. Katz and K. Murphy, "Changes in
Relative Wages, 1963-87: Supply and Demand Factors," QJE 1992.
Krueger, A., “How Computers have Changed the Wage Structure? Evidence from
Micro Data.” Quarterly Journal of Economics, 1993.
Levy, F. and R. Murnane, “
Machin, S. and J. Van Reenen, “Technology and changes in skill structure:
Evidence from seven OECD countries” QJE 1998.
7. Earnings inequality II: transitory inequality,
consumption and welfare (Lectures
15, 16)
* Gottschalk, Peter and Robert Moffitt
(1994). The Growth of Earnings Instability in the
Moffitt, Robert A.
and Peter Gottschalk (1995). Trends in the Autocovariance
Struc- ture of Earnings in
the
* Moffitt, Robert A. and Peter Gottschalk
(2002). Trends in the Transitory Variance of Earnings in the
* Angus Deaton and
Christina Paxson (1994). Intertemporal
Choice and Inequality, Journal of Political Economy, 102(3), pp. 437-467.
* Richard Blundell
and Ian Preston (1998). Consumption Inequality and Income Uncertainty, Quarterly Journal of Economics, 113(2), pp.603-40.
Heathcote,
Jonathan, Kjetil Storesletten
and Gianluca Violante
(2005).
Two Views of Inequality Over the Life-Cycle. Journal of the European Economic Association, 3(2-3), pp.765-775.
Orazio Attanasio (2004). What Really Happened to Consumption
Inequality in the US? NBER Working Paper No. 10338.
Krueger, Dirk and Fabrizio Perri (2002). Does Income
Inequality Lead to Consumption Inequality? Evidence and
Theory. NBER Working Paper 9202.
Blundell, Richard,
Luigi Pistaferri and Ian Preston (2005). Consumption
Inequality and Partial Insurance. mimeo
UCL-IFS/Stanford.
Guvenen, Fatih (2005a). Learning Your Earning: Are Labor Income Shocks Really Very Persistent. mimeo,
Guvenen, Fatih (2005b). An Empirical Investigation
of Labor Income Processes. mimeo,
Primiceri,
Giorgio and Thijs van Rens (2006). Predictable Life-Cycle
Shocks, Income Risk and Consumption Inequality.
Huggett,
Mark, Gustavo Ventura and Amir Yaron (2006). Sources
of Lifetime Inequality.
Cunha, Flavio, James Heckman and
Salvador Navarro (2005). Separating Uncertainty from Heterogeneity
in Life Cycle Earnings.
8. Human capital and the return to schooling (Lectures 17, 18)
Gary S. Becker (1967). Human Capital and the Personal Distribution of Income, Woytinski Lecture No.1
Gary S. Becker (1975). Human Capital.
Jacob Mincer (1958). Investment
in Human Capital and Personal Income Distribution, Journal of Political Economy, 66(4), pp.281-302.
Zvi Grilliches (1977). Estimating the Returns to Schooling:
Some Econometric Problems, Econometrica, 45(1),
pp.1-22.
* David Card (1999). The
Causal Effect of Education on Earnings. Chapter 30 in the Handbook of Labor
Economics, volume 3, Orley Ashenfelter
and David Card (eds). Elsevier.
Joshua D. Angrist and Alan B. Krueger (1991). Does
John Bound and
David A. Jaeger (1996). On the Validity of Season of Birth as an Instrument in
Wage Equations: A Comment on Angrist & Krueger's
"Does Compulsory School Attendance Affect Schooling and Earnings?"
NBER WP 5835
Orley Ashenfelter and Cecilia Rouse (1998). Income, Schooling,
and Ability: Evidence from a New Sample of Identical Twins, Quarterly Journal of Economics, 113(1),
pp.253-284.
Eric A. Hanushek
(1986). The Economics of Schooling: Production and Efficiency in Public
Schools, Journal of Economic Literature,
24(3), pp.1141-1177.
David Card and Alan
B. Krueger (1992).
Does School Quality Matter? Returns to Education and the Characteristics of
Public Schools in the United States, Journal
of Political Economy, 100(1), p.1-40.
David Card and Alan
B. Krueger (1996).
School Resources and Student Outcomes: An Overview of the Literature and New
Evidence from North and South Carolina, Journal
of Economic Perspectives, 10(4), pp.31-50.
9. Project presentations (Lectures 19, 20)
Not covered:
Employment fluctuations II: Real Business Cycles
Kydland,
Finn E. and Edward C. Prescott (1982). Time to Build and
Aggregate Fluctuations. Econometrica, 50(6), pp.1345-1370.
King, Robert G. and
Sergio T. Rebelo (1999). Resuscitating
Real Business Cycles. In: John B. Taylor and Michael Woodford (eds), Handbook of Macroeconomics,
volume 1B, pp.927-1007.
Backus, David K.,
Patrick J. Kehoe and Finn E. Kydland (1995). International
Business Cycles: Theory and Evidence. In: Thomas F. Cooley (ed),
Frontiers of Business Cycle Research, chapter 11.
Hall, Robert E. (1997). Macroeconomic
Fluctuations and the Allocation of Time. Journal of Labor Economics, 15(1), pp.S223-S250.
Hansen, Gary D. (1985). Indivisible
Labor and the Business Cycle. Journal of
Monetary Economics, 16(3), pp.309-327,
Benhabib,
Jess, Richard Rogerson and Randall Wright (1991). Homework in
Macroeconomics: Household Production and Aggregate Fluctuations. Journal of Political Economy, 99(6), pp.1166-1187.
Cho, Jang-Ok and
Thomas F. Cooley (1994). Employment and Hours over the
Business Cycle. Journal of Economic Dynamics and
Control, 18(2), pp.411-432.
Human Capital: International evidence and the social
return
George Psacharopoulos
(1994). Returns to Education: A Global Update, World Development, 22(9), pp.1325-1343.
Heckman, James J.
and Peter J. Klenow (1997). Human
Capital Policy. mimeo,
Acemoglu,
Daron and Joshua Angrist
(1999).
How large are Social Returns to Education? Evidence from
Compulsory Schooling Laws. NBER WP 7444.
Moretti, Enrico (2004).Workers’ Education, Spillovers, and Productivity:
Evidence from Plant-Level Production Functions. American Economic Review, 94(3),
pp.656-690.
* Alan B. Krueger and Mikael Lindahl
(2001). Education for Growth: Why and for Whom? Journal of Economic
Literature, 39(4), pp.1101-1136.
Coen N. Teulings and Thijs van Rens (2007). Education, Growth and Income
Inequality. Review of Economics
and Statistics, forthcoming.
Ciccone, Antonio and Giovanni Peri (2006). Identifying Human-Capital
Externalities: Theory with Applications. Review of Economic Studies, 73, pp. 381-412.
Further topics
·
Firing
costs, European unemployment and labor hoarding
·
Wage
rigidity
·
Wage
posting (competitive search)
·
Participation
and the decision to be out of the labor force
·
Program
evaluation
·
Residual
wage dispersion (search models with heterogeneity)
·
Search
frictions in an RBC model
·
Regulated
labor markets: professional licensing on the market
for lawyers