American University Department of Economics June 2014 Labor Comprehensive Exam One of the three student learning outcomes of the PhD program is that students will “demonstrate mastery of an applied field of knowledge within the discipline of economics.” This exam is your opportunity to so demonstrate. Your emphasis should therefore be on communicating to us how well you understand the main theoretical frameworks and empirical methods of the field. You are welcome to cite key papers and mention actual statistics to indicate orders of magnitude, but don’t get bogged down in details. PART 1: Answer question 1. 1) Discuss the collective model of household labor supply. Explain the basic principle and its policy relevance. How do we implement the collective model empirically? What are some important extensions of the model? What are the limitations? Cite estimation methods allowing us to treat structural modeling problems such as the estimation of structural model parameters and getting statistical inference on them, or taking into account the panel dimension of a data set. PART 2: Answer question 2 or 3. 2) List at least four examples of labor policies targeting the reduction of unemployment. Describe the literature on one of these examples. Enrich your discussion by 1) citing empirical work(s) you are familiar with and emphasizing the originality of the empirical approaches in the paper(s), and 2) citing statistical tests allowing eventually to check/prove some specific assumption. 3) You studied the methods of measuring the impact of policies targeting reduction of unemployment extensively, but know that the methodology is useful to answer other types of research questions. List at least three examples of these other types of research questions. Describe the literature on one of these examples. Enrich your discussion by 1) citing empirical work(s) you are familiar with and emphasizing the originality of the empirical approaches in those papers, and 2) citing statistical tests allowing eventually to check/prove some specific assumption. PART 3: Answer question 4 or 5. 4) Derive the labor demand curve for a firm with typically shaped isoquants. Define (that is, distinguish between in words, use equations, and draw a graph to illustrate) the following: wage elasticity of labor demand, elasticity of substitution, cross price elasticity of labor demand (with respect to the price of capital). 5) Summarize the theoretical and empirical treatments of individual’s decision to supply labor. Discuss a) the theoretical effect(s) of changing wages on hours worked, b) the effects of redistribution schemes such as Aid to Families with Dependent Children, Temporary Assistance to Needy Families and the Earned Income Tax Credit, and c) the labor supply questions that require treatment within a life-cycle approach.