Instructors: John S. Earle and Almos Telegdy Department of Economics Central European University COURSE SYLLABUS ADVANCED LABOR ECONOMICS Semester and Time Period of the Course: Winter term, 2015/2016 academic year Course Level: PhD Number of Credits: option of 2 or 4 credits (4 or 8 EST credits). Pre-requisites: Core Microeconomics, Core Econometrics Office hours: Earle: Monday 3-5 and by appointment, Nádor utca 11, Rm. 601, Tel: 327-3229, earlej@ceu.edu Telegdy: Tuesday 3-5 and by appointment, Nádor utca 11 Rm. 413, Tel: 327-3234, telegdya@ceu.edu Course Description: This course covers selected topics in labor economics for PhD students. Relevant theory will be discussed, but there will be some emphasis on what most labor economists do: applied research that tests or calibrates theories, that evaluates the impact of institutions and policies, or that simply attempts to provide careful description of important labor market phenomena. The course is offered in two modes: the first (for 2 credits) is based on lectures and readings, and the second (for 4 credits) adds two writing assignments, including a research project supervised by the instructors; these are described further below. Learning Outcomes of the course: Knowledge of selected areas of professional research in the field of labor economics. Ability to criticize and evaluate previous research. Capability to carry out labor economics research. Ability to write papers that contribute to the field. Course Requirements There are two options for course requirements and assessment. Option 1 (2 credits) has a comprehensive final exam (on a date to be scheduled by the Department) that counts for 100% of the course grade. Option 2 (4 credits) adds two (possibly linked) writing assignments: a referee report and a paper based on a replication project. The referee report is a short analysis of a labor economics paper describing its contributions to existing research and making criticisms and suggestions for improvement, and the replication project involves reproducing the analysis in some (possibly the same) paper, with some modifications designed to test the robustness of the original results. The paper to be refereed must be chosen by February 2 and the referee report is due February 9. A research prospectus for the replication project should be submitted by February 21. A draft of the paper is due March 4, and it should be presented to the class in the following week, with the final version due April 1 (incorporating comments from the presentation). Organizing the
assignments this way provides an opportunity to explore some area of interest more deeply, to carry out empirical research using microdata, and to experience the process of designing, implementing, writing, and presenting a research paper. The instructors are available for advice, ideas, and feedback throughout, and more guidance on details of these assignments will be provided in the first week of classes. Under Option 2, the course grade is determined as follows: Exam 50% Referee report 7% Prospectus 3% Replication paper 35% In the written work, both the quality of writing and the quality of analysis will be important criteria in grading. Course Schedule and Reading list The reading list below serves several functions: it includes literature reviews (typically books, Handbook of Labor Economics chapters, or Journal of Economic Literature articles), classic works that any professional labor economist should be familiar with, and articles that illustrate certain pedagogical points for this course. Essential ( required ) readings are indicated with an asterisk, and additional papers are supplied as suggestions both for the replication projects and for further reading on topics of particular student interest. The list of topics and readings is far too long for the short time of the 2-credit course, but it gives some notion of the scope of topics and ideas in labor economics, and it allows some flexibility in choices of what we cover in class. 1. Research Approaches and Methods in Labor Economics *Arulampalam, W., J. Hartog, T. MaCurdy, and J. Theeuwes, Replication and Re-Analysis. Labour Economics, Vol. 4(2), 99-108, June 1997. *Pencavel, John, Labor Markets Under Trade Unionism: Employment, Wages, and Hours. Blackwell: Cambridge, 1991. Chapter 1. *Angrist, Joshua D., and Jorn-Steffan Pischke, The Credibility Revolution in Empirical Economics: How Better Research Design is Taking the Con out of Econometrics. Journal of Economic Perspectives, Vol. 24(2), 3-30, Spring 2010. *Keane, Michael P., A Structural Perspective on the Experimentalist School. Journal of Economic Perspectives, Vol. 24(2), 47-58, Spring 2010. Angrist, Joshua, and Alan Krueger, "Empirical Strategies in Labor Economics." Handbook of Labor Economics, Vol. 3A, 1999, Sections 1-2. Heckman, James J., Building Bridges Between Structural and Program Evaluation Approaches to Evaluating Policy. Journal of Economic Literature, Vol. 48(2), 356-398, June 2010. Leamer, Edward E., Tantalus on the Road to Asymptotia. Journal of Economic Perspectives, Vol. 24(2), 31-46, Spring 2010. Hamermesh, Daniel S., Replication in Economics, NBER Working Paper 13026, April 2007. 2. Demand for Labor Services *Hamermesh, Daniel, Labor Demand. Princeton: Princeton University Press, 1993. Chapters 1, 2, 4, 6, especially pp. 18-33, 44-55, 137-160, 205-216 (skim rest). 2
Bond, Stephen and John Van Reenen, Microeconometric Models of Investment and Employment, in J.J.Heckman and E.E.Leamer, eds., Handbook of Econometrics, Vol. 6A, 4417-98, 2007. *Pencavel, John, and Ben Craig, The Empirical Performance of Orthodox Models of the Firm: Conventional Firms and Worker Cooperatives. Journal of Political Economy, 718-744, August 1994. *Card, David, "Unexpected Inflation, Real Wages, and Employment Determination in Union Contracts." American Economic Review, 669-688, September 1990. Gruber, Jonathan, "The Incidence of Payroll Taxation: Evidence from Chile." Journal of Labor Economics, Vol. 15(3), pt. 2, S72-S101, July 1997. Angrist, Joshua, Short-Run Demand for Palestinian Labor. Journal of Labor Economics, Vol. 14(3), 425-453, July 1996. *Oi, Walter, Labor as a Quasi-Fixed Factor. Journal of Political Economy, Vol. 70(6), 538-555, December 1962. *Hamermesh, Daniel, and Gerard Pfann, Adjustment Costs in Factor Demand. Journal of Economic Literature, Vol. 34, 1264-92, September 1996. 3. Trade Unions *Pencavel, John, Labor Markets Under Trade Unionism: Employment, Wages, and Hours. Blackwell: Cambridge, 1991. Chapters 2.1-2.3, 3.1-3.3, 3.6-3.7, 4.1-4.7, 5.1-5.4, 5.7-5.9. *DiNardo, John, and David S. Lee, Economic Impacts of New Unionization on Private Sector Employers: 1984-2001. Quarterly Journal of Economics, 1383-1441, 2004. *Hirsch, Barry T., Sluggish Institutions in a Dynamic World: Can Unions and Industrial Competition Coexist? Journal of Economic Perspectives, Vol. 22(1), 153-176, Winter 2008. Brown, James N., and Orley Ashenfelter, Testing the Efficiency of Employment Contracts. Journal of Political Economy, Vol. 94, S40-S87, 1986. 4. Supply of Labor Services *John Pencavel, Labor Supply of Men: A Survey. In Handbook of Labor Economics, Vol. 1, Chapter 1, North-Holland, 1986. Page 1-7. *Blundell, Richard, and Thomas MaCurdy, Labor Supply: A Review of Alternative Approaches. In Handbook of Labor Economics, Vol. 3A, North-Holland, 1999. Sections 1, 4, 5, 6. Michael P. Keane, Labor Supply and Taxes: A Survey, Journal of Economic Literature 49(4), December 2011, 961-1075. Lundberg, Shelly, and Robert A. Pollak, The American Family and Family Economics. Journal of Economic Perspectives, Vol. 21(2), 3-26, Spring 2007. Weiss, Yoram, Work and Leisure: A History of Ideas. Journal of Labor Economics, Vol. 27(1), 1-20, 2009. MaCurdy, Thomas, An Empirical Model of Labor Supply in a Life-Cycle Setting. Journal of Political Economy, Vol. 89, 1059-1085, 1981. Becker, Gary, A Theory of the Allocation of Time. Economic Journal, Vol. 75, 493-517, 1965. 3
Peracchi, Franco, and Finis Welch, Trends in Labor Force Transitions of Older Men and Women. Journal of Labor Economics, Vol. 12(2), 1994. *Blau, David M., and Ryan M. Goodstein, Can Social Security Explain Trends in Labor Force Participation of Older Men in the United States? Journal of Human Resources, Vol. 45(2), 328-363, 2010. Ashenfelter, Orley, Kirk Doran, and Bruce Schaller, A Shred of Credible Evidence on the Long Run Elasticity of Labor Supply. Economica, Vol 77, 637-650, 2010. 5. Behavioral Approaches to Labor Supply Camerer, Colin, Linda Babcock, George Loewenstein, and Richard Thaler, Labor Supply of New York City Cabdrivers: One Day at a Time. Quarterly Journal of Economics, 407-441, May 1997. Farber, Henry S., Is Tomorrow Another Day? The Labor Supply of New York City Cabdrivers. Journal of Political Economy, Vol. 113(1), 46-82, 2005. *Farber, Henry S., Why You Can't Find a Taxi in the Rain and Other Labor Supply Lessons from Cab Drivers. NBER Working Paper No. 20604, October 2014. *Andersen, Steffen, Alec Brandon, Uri Gneezy, and John A. List, Toward an Understanding of Reference-Dependent Labor Supply: Theory and Evidence from a Field Experiment. NBER Working Paper No. w20695, November 2014. 6. Social Interactions *Young, H. Peyton, The Economics of Convention. Journal of Economic Perspectives, Vol. 10(2), 105-122, Spring 1996. Bandiera, Oriana, Iwan Barankay, and Imran Rasul Social Preferences and the Response to Incentives: Evidence from Personnel Data. Econometrica, Vol. 77, 1047-94, July 2009. Earle, John S., and Klara Sabirianova Peter, Complementarity and Custom in Wage Contract Violation. Review of Economics and Statistics, November 2009. Mas, Alexandre, and Enrico Moretti, Peers at Work. American Economic Review, Vol. 99(1), 112 45, 2009. 7. Immigration *Borjas, George J., Self-Selection and the Earnings of Immigrants. American Economic Review 77(4), 531-553, 1987. Borjas, George J., "The Labor Demand Curve Is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market." Quarterly Journal of Economics, 118, 1336-1374, November 2003. *Borjas, George, The Slowdown in the Economic Assimilation of Immigrants: Aging and Cohort Effects Revisited Again. NBER Working Paper No. 19116, 2013. Card, David E., The Impact of the Mariel Boatlift on the Miami Labor Market. Industrial and Labor Relations Review, Vol. 43, 245-257, 1990. *Chiquiar, Daniel, and Gordon H. Hanson, International Migration, Self-Selection, and the Distribution of Wages: Evidence from Mexico and the United States. Journal of Political Economy 113(2), 239-281, 2005. Francesco D'Amuri, and Giovanni Peri, Immigration, Jobs and Labor Market Institutions: Evidence from Europe. Journal of European Economic Association, forthcoming. 4
*Ottaviano, Gianmarco, and Giovanni Peri (2012), Rethinking the Effects of Immigration on Wages. Journal of the European Economic Association 10(1), 152-197, 2012. 8. Wages and Employment Over the Business Cycle Carnerio, Anabela, Paulo Guimaraes, Pedro Portugal, Real Wages and the Business Cycle: Accounting for Worker, Firm, and Job Title Heterogeneity. American Economic Journal: Macroeconomics, 4(2), 133-152, 2012. Elsby, Michael, W., Donggyun Shin, Gary Solon, Wage Adjustment in the Great Recession. NBER Working Paper No. 19,478, 2013. *Foster, Lucia, Cheryl Grim, John Haltiwanger (2014), Reallocation in the Great Recession: Cleansing or Not? NBER Working Paper No. 20427. *Kwon, Illong, Eva Meyersson Milgrom, and Siwoon Hwang, Cohort Effects in Promotions and Wages. Journal of Human Resources 45(3), 772-808, 2010. Martins, Pedro, Gary Solon, Jonathan P. Thomas, Measuring What Employers Do about Entry Wages over the Business Cycle: A New Approach. American Economic Journal: Macroeconomics, 4(4), 36-55, 2012. *Moscarini, Giuseppe, Fabien Postel-Vinay, The Contribution of Large and Small Employees to Job Creation in Times of High and Low Unemployment. American Economic Review 102(6), 2509-2539, 2012. 9. Wage Inequality and Skill-Biased Technical Change *Acemoglu, Daron, and David Author, Skills, Tasks, and Technologies: Implications for Employment and Earnings. Handbook of Labor Economics, Vol. 4B, Chapter 12, North- Holland, 2011. *Autor, David, and David Dorn, The Growth of Low Skill Service Jobs and the Polarization of the U.S. Labor Market. American Economic Review 103(5), 2013. *Autor, David H., Lawrence F. Katz, and Melissa S. Kearney, Trends in U.S. Wage Inequality: Revising the Revisionists. Review of Economics and Statistics 90(2), 300-323, 2008. *Katz, Larry, David Autor, and Melissa Kearney, The Polarization of the U.S. Labor Market. American Economic Association Papers and Proceedings, 189-194, May 2006. Lemieux, Thomas, Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill? American Economic Review, Vol. 96(3), 461-498, June 2006. 10. General Human Capital and Earnings *Almond, Douglas, and Janet Currie, Human Capital Development before Age Five. Handbook of Labor Economics, Vol. 4B, Chapter 12, North-Holland, 2011. Griliches, Zvi, Estimating the Returns to Schooling: Some Econometric Problems. Econometrica, Vol. 45(1), 1-21, January 1977. Card, David, The Causal Effect of Education on Earnings. Handbook of Labor Economics, Vol. 3A, North-Holland, 1999. *Heckman, James J., Lance Lochner, and Petra Todd, Earnings Functions and Rates of Return. Journal of Human Capital, Vol. 2(1), 1-31, Spring 2008. Willis, Robert J., and Sherwin Rosen, "Education and Self-Selection." Journal of Political Economy, Vol. 87(5), pt. 2, S7-S36, 1979. 5
11. Specific Capital, Matching, and Mobility Jovanovic, Boyan, Job Matching and the Theory of Turnover. Journal of Political Economy, 972-990, 1979. Jovanovic, Boyan, Firm-Specific Capital and Turnover. Journal of Political Economy, 1246-1260, 1979. *Farber, Hank, "Mobility and Stability: The Dynamics of Job Change in Labor Markets." Handbook of Labor Economics, Vol. 3B, North-Holland, 1999. Topel, Robert H., Specific Capital, Mobility, and Wages: Wages Rise With Job Seniority. Journal of Political Economy, Vol. 99, 145-176, 1991. Mortenson, Dale, T., Wages, Separations, and Job Tenure: On-the-Job Specific Training or Matching? Journal of Labor Economics, Vol. 6(4), 445-471, 1988. *Topel, Robert H., and Michael P. Ward, Job Mobility and the Careers of Young Men. Quarterly Journal of Economics, 439-479, May 1992. *Von Wachter, Till, and Stefan Bender, In the Right Place at the Wrong Time: The Role of Firms and Luck in Young Workers Careers. American Economic Review, Vol. 96(5), 1679-1705, December 2006. 12. Job Search and Unemployment *Mortenson, D., Job Search and Labor Market Analysis. In Handbook of Labor Economics, Vol. II, 1986, 849-866. *Meyer, B., Unemployment Insurance and Unemployment Spells. Econometrica, Vol. 58, 757-782, 1990. Eckstein, Zvi, and Gerard van den Berg, Empirical Labor Search: A Survey. Journal of Econometrics, 2006. Valletta, Robert G., Recent extensions of U.S. unemployment benefits: search responses in alternative labor market states. IZA Journal of Labor Policy, Vol. 3/18, 2014. 6