January 19, 2016
E CONOMICS 888501
A NALYSIS OF L ABOR M ARKETS
Spring 2016
Monday, Wednesday 8:30 - 9:45 am
O'Neill Library 257
Instructor: Claudia Olivetti
Office: Room 334
E-mail: claudia.olivetti@bc.edu
Phone: 552-3674
Office Hours: M 5:00-6:00 pm or by appointment
Course Outline
This course, the second of a two-part sequence, introduces the tools used by economists to analyze labor markets. It assumes a solid background in economic theory and econometrics. We will study both theoretical and empirical papers, with the intention of offering a survey of the field. One theme will be modeling. Another will be how empirical work is performed and how it guides and is guided by theory
In the process of providing this foundation, the course will cover a subset of advanced topics in order to expose you to some of the most recent open questions and tools in the field. We will study: labor supply, the wage structure, inequality and intergenerational mobility, theories of racial and gender discrimination and the link between family structure, labor supply, fertility and education.
It will be self-evident that the reading list is extensive. It is intended to serve as a resource. As we begin each section, I will give you guidance about which papers to read. Almost all journals and the Elsevier handbooks are now available on-line through the Boston College library system.
NBER working papers can be accessed at http://papers.nber.org/papers.
There is no required text for this course, but I recommend purchasing as a reference: Cahuc,
Pierre, Stéphane Carcillo, and André Zylberberg, Labor Economics , (2 nd edition), Cambridge,
MA: MIT Press, 2014.
Course Requirements
Grading is based on class presentation/discussion (30%), three problem sets (30%) and the research proposal and its presentation (40%).
Class presentation: Each student is required to make one class presentation of a paper from the list at the bottom of the syllabus (approximate dates of discussion are included). The idea is to gain experience for academic presentations/discussions and teaching. Students should select one
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January 19, 2016 of the papers by January 25. You may sort yourselves among papers using any mechanism of your choosing.
NOTE: A typical presentation will consist of a 10-15 minute summary of the paper, a 5-10 minute critical discussion, and 15-20 minutes of class discussion. The other students are required to read the paper in advance and participate in the class discussion.
Class participation: All students are expected to contribute to class discussion. Thus you must read the papers announced before each class meeting. I will provide a list of questions that you should keep in mind as you read the required papers for the class. These are also useful for preparing the paper presentation.
Problem Sets: There will be three problem sets worth 10% each.
Two of the problem sets require you to replicate (part of) an important empirical paper in labor economics and to think about how to extend it. I encourage you to work on these problem sets in groups and help each other out as much as possible. These are fairly long and time consuming assignments, and you don’t want to be stuck forever on figuring out a small thing in Stata (or whatever you are using) if a classmate can help you out easily.
You are however required to write your own code and hand in your own write up of the problem set.
The remaining problem set will be theory/reasoning based. The questions on this problem set will resemble the types of questions that may show up on the field exam.
Research Proposal: I require a research proposal, which serves both as a review of a specific topic of particular interest to you and as an exercise to help prepare you for the research process needed to develop and complete a PhD thesis successfully. This exercise is structured in two parts. o Identify a topic of interest to you and develop an understanding of the current state of research in that area. This paper should include a thesis statement (what you want to add to the literature), 2 to 3 pages describing the literature and a bibliography. This is due no later than March 15. o Describe the analysis you propose to develop and identify the data that are available to complete the analysis you propose. If this is a theoretical exercise, identify key variables or parameters that will drive the results based on the existing models as well as your original thoughts on how to improve it. This should be quite precise. If you are completing an empirical exercise, describe the statistical model and estimation technique you think is appropriate, confirm what data will be used to estimate the model, discuss potential sensitivity analyses. o Class Presentation of research proposal, May 2 nd and 4 th . Each presentation will be approximately 30 minutes. o The final research proposal is also due on May 2 nd .
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January 19, 2016
COURSE OUTLINE
January 19: I NTRODUCTORY C LASS
January 25 – February 10: L ABOR S UPPLY
• Static Labor Supply
• Dynamic Labor Supply
• Family Labor Supply
• Related issues: o Identification of structural parameters o Non-participation, o Micro/macro elasticity puzzle
February 15: No Meeting
February 17: No Meeting, Substitute Class February 19
February 20: Problem Set 1 due
February 22 to March 16: W AGE S TRUCTURE
• Trends in Wage Inequality and Polarization
• Conceptual Frameworks and Explanations: o Skill-biased Technical Change o Globalization and Outsorcing
March 15: 2-3 page research proposal due
March 21 to April 6: R ACE AND G ENDER D ISCRIMINATION IN THE L ABOR M ARKET
•
Empirics o Trends o Measurement Issues
•
Theory o Taste-based discrimination o Statistical discrimination o Frictions
• Audit studies and other experiments
April 4: Problem Set 2 due
April 11-13: I NTERGENERATIONAL M OBILITY
• Estimation of intergenerational elasticities o Two-Generation o Multiple Generations
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January 19, 2016
• Nature vs. Nurture o Siblings, twins and adoptees o The effect of the childhood environment on later outcomes
April 20 - 27: T OPICS IN E CONOMICS OF THE F AMILY
• Female Labor Supply
• Fertility
• Marriage and Divorce
•
May 2 and 4: Students presentations and final proposal due
May 15: Problem Set 3 due
R EADINGS FOR CLASS DISCUSSION :
LABOR SUPPLY: o February 3: Eissa (1995) o February 10: Blundell et al. (2005) o February 19: Voena (2015) o February 19: Bronson (2013)
WAGE STRUCTURE: o March 16: Hanlon (2015) o March 16: Schmieder and Goldschmidt (2015)
DISCRIMINATION: o April 4: Coate and Loury (1993) o April 6: Lehmann (2013)
INTERGENERATIONAL MOBILITY: o April 13: Chetty et al (2014) o April 13: Hilger (2015)
TOPICS IN ECON OF THE FAMILY o April 27: Vogl (2013) o April 27: Persson (2014)
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January 19, 2016
R EFERENCES FOR C LASS D ISCUSSION
[Feb 3] Eissa, N. “Taxation and Labor Supply of Married Women: The Tax Reform Act of 1986 as a Natural Experiment” NBER Working Paper 5023, 1995.
[Feb 10] Blundell, Richard, Pierre-Andre Chiappori, Costas Meghir. 2005. Collective Labor
Supply with Children, Journal of Political Economy 113: 1277-1306.
[Feb 19] Alessandra Voena. 2015. “Yours, Mine and Ours: Do Divorce Laws Affect the
Intertemporal Behavior of Married Couples?” American Economic Review http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2007575
[Feb 19] Bronson, Mary Ann. 2013. “Degrees are Forever: Marriage, Educational Investment, and Lifecycle Labor Decisions of Men and Women.” Available at: https://b3b32429-a-62cb3a1a-s-sites.googlegroups.com/site/maryannbronson/GenderGap.pdf
[March 16] Walker, Hanlon. 2015. `Necessity is the Mother of Invention: Input Supplies and
Directed Technical Change.’ Econometrica , 83(1), pp. 67-100. http://www.econ.ucla.edu/whanlon/papers/hanlon_dtc.pdf
[March 16] Schmieder, Johannes and Deborah Goldschmidt. 2015. `The Rise of Domestic
Outsorcing and the Evolution of the German Wage Structure.’ NBER Working Paper No. 21366.
[April 6] Lehmann, Jee-Yeon K. 2013. `Job Assignment and Promotion Under Statistical
Discrimination: Evidence from the Early Careers of Lawyers,’ http://www.uh.edu/~jlehman2/papers/promotion_lawyers_lehmann.pdf
[April 13] Hilger, Nate. 2015. `Parental Job Loss and Children's Long-Term Outcomes: Evidence from 7 Million Fathers' Layoffs.’ Forthcoming American Economic Journal: Applied Economics . https://drive.google.com/file/d/0B8J_qdFYwNJ6Mkl0WEFRT2VrYVU/view
[April 27] Vogl, Tom. “Marriage Institutions and Sibling Competition: Evidence from South
Asia.” Quarterly Journal of Economics , August 2013, 128(3): 1017-1072. http://www.princeton.edu/~tvogl/vogl_sisters.pdf
[April 27] Persson, Petra. 2014. “Social Insurance and the Marriage Market.” Available at: http://web.stanford.edu/~perssonp/Persson_IFAU.pdf
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January 19, 2016
READING LIST
L ABOR S UPPLY :
[Reference] Blundell R. and MaCurdy T. (1999), “Labor Supply: A Review of Alternative
Approaches”, in Ashenfelter and Card eds, Handbook of Labor Economics, Vol. 3A
[Reference] Blundell R. and MaCurdy T. and Costas Meghir (2007), “Labor Supply Models,” in
James J. Heckman and Edward E. Leamer eds, Handbook of Econometrics, Vol. 6 A, pp. 4667–
4775.
Additional References :
Bergstrom T.C. (1997) “A Survey of Theories of the Family.” Handbook of Population and
Family Economics, Chapter 2, eds. Rosenzweig M.R. and Stark O.
Hotz V. J., Klerman J.A. and Willis R.J. (1997), “The Economics of Fertility in Developed
Countries”. Handbook of Population and Family Economics, Chapter 7, eds. Rosenzweig M.R. and Stark O.
Static Labor Supply
Blundell, Richard; Duncan, Alan and Meghir, Costas. “Estimating Labor Supply Responses
Using Tax Reforms,” Econometrica , July 1998.
Eissa, N. and J. Liebman, “Labor Supply Response to the Earned Income Tax Credit,” Quarterly
Journal of Economics 111 (1996), 605-637
R. Chetty, J. Friedman, T. Olsen, and L. Pistaferri, “Adjustment Costs, Firm Responses, and
Labor Supply Elasticities: Evidence from Danish Tax Records,” NBER Working Paper No.
15617, December 2009.
Ashenfelter O. and M. Plant, “Non-Parametric Estimates of the Labor Supply Effects of Negative
Income Tax Programs,” Journal of Labor Economics, 8.1 (January 1990), S396-S415.
Saez E., “Do Taxpayers Bunch at Kink Points?” American Economic Journal: Economic Policy,
2009.
Eissa, N. “Taxation and Labor Supply of Married Women: The Tax Reform Act of 1986 as a
Natural Experiment” NBER Working Paper 5023, 1995.
Meyer, Bruce and Rosenbaum, Dan “Welfare, the Earned Income Tax Credit, and the Labor
Supply of Single Mothers,” Quarterly Journal of Economics, 116 (August 2001): 1063-1114.
Dynamic Labor Supply
MaCurdy T. “An Empirical Model of Labor Supply in a Life-Cycle Setting” (1981), Journal of
Political Economy , 89: 1059-1085
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January 19, 2016
Olivetti C. “Changes in Women's Hours of Market Work: The Role of Returns to Experience,”
Review of Economic Dynamics , 9 (4): 557-587, October 2006
Eckstein, Zvi, and Osnat Lifshitz (2011) “Dynamic female labor supply.” Econometrica 79(6),
1675–1726
Heckman J. and MaCurdy T. (1980), “A Life-Cycle Model of Female Labor Supply”, The Review of Economic Studies , 47: 47-74
Ben-Porath, Yoram (1967), “The Production of Human Capital and the Life Cycle of Earnings,”
Journal of Political Economy , Vol. 75, No. 4-1, pp. 352-365.
Eckstein Z. and Wolpin K. (1989), “Dynamic Labor Force Participation of Married Women with
Endogenous Work Experience” The Review of Economic Studies 56, 375-390
Imai S. and M. P. Keane, 2004, "Intertemporal Labor Supply and Human Capital Accumulation,"
International Economic Review 45(2), 601-641
Shaw K. (1989), “Life-cycle labor supply with human capital accumulation” International
Economic Review 30: 431-456
Altug S. and Miller R.A. (1998), “The Effect of Work Experience in Female Wages and Labor
Supply” The Review of Economic Studies 65: 45-85
Heckman, James J. (1976) “A Life-Cycle Model of Earnings, Learning, and Consumption,”
Journal of Political Economy , Vol. 84, Issue 4, Part 2: Essays in Labor Economics in Honor of H.
Gregg Lewis, S11-S44.
Family Labor Supply
Chiappori, Pierre-Andre. 1988. Rational Household Labor Supply. Econometrica 56: 63-90.
Chiappori, Pierre-Andre. 1997. Introducing Household Production in Collective Models of Labor
Supply. The Journal of Political Economy 105: 191-209.
Blundell, Richard, Pierre-Andre Chiappori, Costas Meghir. 2005. Collective Labor Supply with
Children, Journal of Political Economy 113: 1277-1306.
Manser, Marilyn and Murrey Brown. 1980. Marriage and Household Decision Making: A
Bargaining Analysis. International Economic Review , 21, 31-44.
McElroy, Marjorie and Mary Jean Horney. 1981. Nash Bargained Household Decisions: Toward a Generalization of the Theory of Demand. International Economic Review , 22, 333-349.
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January 19, 2016
Related Issues
Keane, Michael P., and Richard Rogerson. 2012. “Micro and Macro Labor Supply Elasticities: A
Reassessment of Conventional Wisdom.” Journal of Economic Literature ,
50(2): 464-76.
Chetty, Raj. 2012. “Bounds on Elasticities with Optimization Frictions: A Synthesis of
Micro and Macro Evidence on Labor Supply.” Econometrica 80 (3): 969-1018.
Chetty, Raj, John N. Friedman, Tore Olsen, and Luigi Pistaferri. 2011. “Adjustment
Costs, Firm Responses, and Micro vs. Macro Labor Supply Elasticities: Evidence from
Danish Tax Records.” Quarterly Journal of Economics 126 (2): 749-804.
Glaeser, Edward L., Bruce I. Sacerdote and Jose A. Scheinkman. 2003. “The Social
Multiplier.” Journal of the European Economic Association 1 (2-3): 345-353.
Maurin, Eric and Julie Moschion. 2009. “The Social Multiplier and the Labor Market
Participation of Mothers.” American Economic Journal: Applied Economics 1 (1): 251-
272.
Rogerson, Richard and Johanna Wallenius. 2009. “Micro and Macro Elasticities in a
Life Cycle Model with Taxes”, Journal of Economic Theory 144: 2277-2292.
Rupert, Peter, Richard Rogerson, and Randall Wright, “Estimating Substitution Elasticities in
Models with Home Production,” Economic Theory , VI (1995), 179 –193.
Rupert, Peter, Richard Rogerson, and Randall Wright, “Homework in Labor Economics:
Household Production and Intertemporal Substitution,” Journal of Monetary Economics , XLVI
(2000), 557–579.
Non-participation
Neal, Derek, "Is The Measured Black-White Wage Gap Among Women is Too Small?" Journal of Political Economy , 111 (May 2003) http://economics.uchicago.edu/dneal/May-03-jpe.pdf
Olivetti, Claudia and Barbara Petrongolo “Unequal Pay or Unequal Employment? A Cross-
Country Analysis of Gender Gaps,” Journal of Labor Economics 26, no. 4 (October 2008): 621-
654
Blundell, R., A. Gosling, H. Ichimura and C. Meghir, “Changes in the Distribution of Male and
Female Wages Accounting for Employment Composition Using Bounds,” Econometrica, Vol. 75,
No. 2 (March, 2007), 323–363.
Casey, Mulligan and Yona Rubinstein (2008) “Selection, Investment, and Women's Relative
Wages Over Time,” Quarterly Journal of Economics 23:3, 1061-1110
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January 19, 2016
W AGE S TRUCTURE :
[Reference] Katz, Lawrence F. and David H. Autor (1999) “Changes in the Wage Structure and
Earnings Inequality” in Orley Ashtenfelter and David Card, eds. Handbook of Labor Economics ,
Vol. 3A, (Amsterdam: North-Holland).
[Reference] Acemoglu, Daron and David Autor. 2010. “Skills, Tasks and Technologies:
Implications for Employment and Earnings.” in Orley Ashtenfelter and David Card, eds.
Handbook of Labor Economics , Vol. 4A, (Amsterdam: North-Holland).
[Reference] Acemoglu, Daron (2002) “Technical Change, Inequality and the Labor Market,”
Journal of Economic Literature, Vol. XL, pp. 7-72. Also available as NBER Working Paper No.
7800, (2000)
Trends in Wage Inequality and Polarization
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Supply and Demand Factors” Quarterly Journal of Economics , Vol. 107, pp. 35-78.
Autor, David H., Lawrence F. Katz and Melissa S. Kearney (2008) “ Trends in U.S. Wage
Inequality: Revising the Revisionists ” Review of Economics and Statistics , 90(2): 300-323.
Autor, David and David Dorn. 2009. “The Growth of Low-Skill Service Jobs and the Polarization of the U.S. Labor Market” NBER WP 15150.
Johnson, Matthew and Michael P. Keane. 2013. A Dynamic Equilibrium Model of the US Wage
Structure, 1968-1996. Journal of Labor Economics, 31 (1): 1-49.
Autor, David H., Lawrence F. Katz and Alan B. Krueger (1998). “Computing Inequality: Have
Computers Changed The Labor Market” Quarterly Journal of Economics , Vol. 113, No. 4, pp.
1169-1213.
Beaudry, P., Doms, M.E. and Lewis, E.G. (2010). ‘Should the personal computer be considered a technological revolution? Evidence from U.S. metropolitan areas’, Journal of Political Economy, vol. 5(118), pp. 988-1036.
DiNardo, John, Nicole Fortin and Thomas Lemieux (1996). “Labor Market Institutions, and the
Distribution of Wages, 1973-1992: A Semiparametric Approach,” Econometrica , Vol. 64, No. 5, pp. 1001-1044.
Juhn, Chinhui, Kevin M. Murphy and Brooks Pierce (1993). “Wage Inequality and the Rise in
Returns to Skill”, Journal of Political Economy Vol. 101, No. 3, pp. 410-442
Gottschalk, Peter and Robert Moffitt (1994) “The Growth of Earnings Instability in the U.S.
Labor Market.” Brookings Papers on Economic Activity , 217 – 272.
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January 19, 2016
Lemieux, Thomas “Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or
Rising Demand for Skill? The American Economic Review , Volume 96, Number 3, June 2006, pp. 461-498(38)
Autor, David H., Lawrence F. Katz and Melissa S. Kearney “ Rising Wage Inequality: The Role of Composition and Prices ” NBER WP #11628, Sep 2005.
Hamermesh, Daniel (1999) “Changing Inequality for Workplace Amenities,” Quarterly Journal of Economics , 114 (November), 1085 – 1123.
Dustmann, C., Ludsteck, J. and Schönberg, U. (2009). ‘Revisiting the German wage structure’,
Quarterly Journal of Economics, vol. 2(124), pp. 843-881.
Firpo, S., Fortin, N.M. and Lemieux, T. (2012). ‘Occupational tasks and changes in the wage structure’, mimeo, University of British Columbia.
Goos, M., Manning, A. and Salomons, A. (2012). ‘Explaining job polarization in Europe: the roles of technology and globalization’, mimeo, Katholieke Universiteit Leuven
Skill-Biased Technical Change
Krusell, Per, Lee Ohanian, Victor Rios-Rull and Giovanni Violante (2000), “Capital-Skill
Complementarity and Inequality” Econometrica 68 (5): 1029-1053.
Goldin, Claudia and Lawrence Katz, (1998) “The Origins of Technology-Skill Complementarity”
Quarterly Journal of Economics , May 1998.
Francesco Caselli. 1999. “Technological Revolutions” American Economic Review , 89:78-102.
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Public Policy , XLVI (1997), 49-95.
Black, Sandra E., and Alexandra Spitz-Oener (2010). Explaining Women's Success:
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Welch, Finis (2000) “Growth in Women’s Relative Wages and Inequality Among Men: One
Phenomenon or Two?” American Economic Review , May, 444 – 450.
Juhn, Chinhui and Dae Kim II (1999) “The Effects of Rising Female Labor Supply on Male
Wages” Journal of Labor Economics , 17(1), 23 – 48.
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January 19, 2016
Globalization and Outsourcing
Artuc, E., Chaudhuri, S. and McLaren, J. (2010). ‘Trade shocks and labor adjustment: a structural empirical approach’, American Economic Review, vol. 3(100), pp. 1008-1045.
Autor, D.H. and Dorn, D. (2013). ‘The growth of low skill service jobs and the polarization of the
U.S. labor market’, American Economic Review, vol. 5(100), pp. 1553-1597.
Autor, D.H., Dorn, D. and Hanson, G.H. (2013a). ‘The China syndrome: local labor market effects of import competition in the United States’, American Economic Review, vol. 6(103), pp.
2121-2168.
Autor, D.H., Dorn, D. and Hanson, G.H. (2013b). ‘The geography of trade and technology shocks in the United States’, American Economic Review Papers and Proceedings, vol. 3(103), pp. 220-
225.
Ebenstein, A., Harrison, A., McMillan, M. and Phillips, S. (Forthcoming). ‘Estimating the impact of trade and offshoring on American workers using the current population surveys’, Review of
Economics and Statistics.
Michaels, G. (2008). ‘The effect of trade on the demand for skill: evidence from the interstate highway system’, The Review of Economics and Statistics, vol. (90), pp. 683-701.
Schmieder, Johannes and Deborah Goldschmidt. 2015. `The Rise of Domestic Outsorcing and the
Evolution of the German Wage Structure.’ NBER Working Paper No. 21366.
R ACE AND G ENDER D ISCRIMINATION IN THE L ABOR M ARKET
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Orley Ashtenfelter and David Card, eds. Handbook of Labor Economics , Vol. 3A, (Amsterdam:
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[Reference: Three recent review papers]
Lang, Kevin, and Jee-Yeon K. Lehmann. 2012. "Racial Discrimination in the Labor Market:
Theory and Empirics." Journal of Economic Literature , 50(4): 959-1006.
Fryer, Roland G., “Racial Inequality in the 21st Century: The Declining Significance of
Discrimination,” Handbook of Labor Economics , Vol. 4, Elsevier, 2011, 865-971.
Charles, Kerwin K and Guryan, Jonathan, “Studying Discrimination: Fundamental
Challenges and Recent Progress,” Annual Reviews of Economics , 3 (2011), 479-511.
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January 19, 2016
Wage Gaps: Facts
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Differences,” Journal of Political Economy, 104(5), October 1996, pages 869-95.
Chandra, Amitabh “Is the Convergence in the Racial Wage Gap Illusory?,” NBER WP 9476,
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Models of Discrimination in Labor Markets
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Albanesi, Stefania and Claudia Olivetti “Home Production, Market Production, and the Gender
Wage Gap: Incentives and Expectations,” NBER WP 12212, May 2006.
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WP 12257
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Roland, Fryer (2006) “Belief-Flipping in a Dynamic Model of Statistical Discrimination,” NBER
WP 12174.
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Evidence from the Early Careers of Lawyers,’ http://www.uh.edu/~jlehman2/papers/promotion_lawyers_lehmann.pdf
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Bowlus, Audra J. and Zvi Eckstein, "Discrimination and Skill Differences in an Equilibrium
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Charles, Kerwin and Jonathan Guryan, "Prejudice and The Economics of Discrimination,"
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January 19, 2016
Szymanski, Stefan, 2000, "A Market Test for Discrimination in the English Professional Soccer
Leagues," Journal of Political Economy , 108(3): 590-603.
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Audit Studies and Experimental Evidence
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Sex Composition of Orchestras.” American Economic Review , 90 (September 2000), 715-41.
Bertrand, Marianne and Sendhil Mullainathan (2004) “Are Emily and Greg More Employable
Than Lakisha and Jamal?: A Field Experiment on Labor Market Discrimination” American
Economic Review , 94 (4): 991 – 1013. Also available as NBER WP 9873.
Fryer Jr., Roland G. and Steven D. Levitt, 2004, "The Causes and Consequences of Distinctively
Black Names," Quarterly Journal of Economics , 119(3): 767-805.
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Earnings” Industrial and Labor Relations Review , 56 (3).
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From the Field," Quarterly Journal of Economics , 119:1 pp 49-89.
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Discriminate: Evidence from a Series of Natural Field Experiments,” NBER Working Paper No.
17855, 2012.
Autor, David H. and David Scarborough, “Does Job Testing Harm Minority Workers? Evidence from Retail Establishments.” Quarterly Journal of Economics, 123 (February 2008): 219--277.
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