ECONOMICS 443 - ECONOMICS OF LABOR
Tuesday & Thursday – 4:25-5:50 pm in FA 209
SPRING 2006 - READING LIST
Instructor: S. Polachek
L.T. 1018/X7-6866
polachek@binghamton.edu
Teaching Assistant: TBA
Office Hours: Tuesday & Thursday 10:15-11:00 a.m.
and by appointment
Office Hours:
TBA
REQUIRED TEXT: George J. Borjas - Labor Economics, 3rd Edition (McGraw-Hill). and Solomon W. Polachek
and W. Stanley Siebert - The Economics of Earnings, 1993 (Cambridge University Press).
RECOMMENDED TEXTS: Ehrenberg, Ronald and Robert Smith - Modern Labor Economics, 8th ed., 2003
(Scott, Foresman & Co.).
Other Readings: Other readings include the articles given in the reading list. Some are optional. Most are
available on-line. Those that are not easily available will be on reserve. The class password is:
A selection of
back exams will also be placed on reserve and on the class website. Important outside readings are demoted by
asterisks (*).
Additional Reference (text) books concerning the labor market that you may want to (but are not required to) look
at include:
Fleisher, Belton and Thomas Kneisner , Labor Economics, 3rd ed., 1984 (Prentice Hall).
Kaufman, Bruce, The Economics of Labor Markets, 5th ed., 1999 (Thomson Learning).
Reynolds, Lloyd, Stanley Masters, and Colletta Moser, Economics of Labor, 11th ed., 1998 (Prentice-Hall).
Hyclak, Johnes and Thornton, Fundamentals of Labor Economics, 2005 (Houghton Mifflin)
Two very rigorous & mathematical texts for the truly interested are:
Addison, John T. and W. Stanley Siebert, The Market For Labor: An Analytical Treatment, 1971 (Goodyear Publ.)
Fallon, Peter and Donald Verry, The Economics of Labor Markets, 1988 (Philip Allan Publishers).
A review of these and other textbooks in labor economics is contained in Nan L. Maxwell's, "Survey of Labor
Economics Textbooks," The Journal of Economic Education (Spring 1985) pp. 147-156. A review of Ehrenberg
and Smith's book is contained in the Industrial and Labor Relations Review, July 1984, pp. 635-636. Polachek and
Siebert are reviewed in the Southern Economics Journal, April 1994, pp. 1077-8; the Industrial and Labor Relations
Review, Jan. 1995, pp. 362-3; and the Economic Journal, Jan. 1994, pp. 176-77.
BRIEF OUTLINE: Labor economics deals with how individuals enhance their economic well being by
participating in work behavior. The basic question concerns earnings distribution: What role does the labor market
play in explaining why some individuals are richer than others? We begin by picturing the total economy and then
concentrating on the static labor market and its internal structure. After analyzing such components as labor supply
and demand, we again study the workings of the market concentrating on shortcomings of the static point-in-time
approach. We then move to the life cycle human capital model which solves these shortcomings by showing how
within a lifetime framework individuals enhance their wages in a consistent manner. This framework can be applied
to understand such phenomena as technology in the labor market, as well as discrimination and other instances of
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demographic wage differentials. Finally other forms of long term contracts are considered and applied to
understanding such issues as worker turnover and the role of labor unions.
GRADING: There will be three full period quizzes (100 points each), one cumulative final test (200 points) and
periodic written homeworks (varying in point value). One is obligated to take each exam, as NO MAKE UPS ARE
GIVEN!!! Written homework assignments will be graded. Assignments handed in after the due date will not be
graded and instead will be counted as a zero. Class participation is important especially for borderline grades. No
term paper will be required.
I. INTRODUCTION (8/29)
A.
The Labor Problem: Differences in Economic Well-being
Mincer, Jacob - "Forward" contained in Polachek-Siebert, p. XIII*
B.
The Circular Flow: Interrelated Markets
Fleisher and Kneisner: Chapter 1 (optional)
Krueger, Alan - AMeasuring Labor=s Share, American Economic Review, Papers and Proceedings, 89 (2),
May 1999, pp. 45 – 51. (available online)
C.
The Scientific Method and the Role of Empirical Analysis
Borjas: Chapter 1
II. THE STATIC AUCTION LABOR MARKET
A.
The Theory of Labor Supply [Whether to Work, Optimal Work Hours, Wage and Income Effects,
Labor Supply Curves (8/31 and 9/5)
Handout #1 (Labor Supply) Sections I to IV due 8/31
Section V due 9/5
Labor Supply Regressions: due 9/7
Borjas - Chapters 2 and 3
Polachek and Siebert: Chapter 5, pp. 96-108 and 112-136
Borjas – Chapter 2 #4, #10 (due: 9/5)
Borjas – Chapter 3 #7, #11 (due: 9/5)
Imbens, Guido, Donald Rubin and Bruce Sacerdote, “Estimating the Effect of Unearned Income on Labor
Earnings, Saving and Consumption: Evidence From a Survey of Lottery Players”, American Economic
Review, (September 2001) 91 (4): 778 – 94 (optional).
Applications of the Labor Supply Model (9/7)
1. Moonlighting
Shisko, Robert and Bernard Rostker - "The Economics of Multiple Job Holding," American Economic
Review, June 1976, 66(3), pp. 298-308 (available via JSTOR).*
Stinson, John - "Multiple Job Holding Up Sharply in the 1980s," Monthly Labor Review, July 1990, 113(7),
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pp. 3-10 [optional].
Mark C Foley - "Multiple Job Holding in Russia During Economic Transition", Yale Economic Growth
Center paper, 1997 (available on web: http://www.unc.edu/~foley/mijh.rtf). (Optional)
2. Mothers with Very Young Children [optional]
Klerman, Jacob and Arleen Leibowitz - "Child Care and Women's Return to Work After Childbirth,"
American Economic Review, May 1990, 80(2), pp. 284-288 (available on JSTOR).
3. Sleep and the Allocation of Time [optional]
Biddle, Jeff and Daniel Hamermesh - "Sleep and the Allocation of Time," Journal of Political Economy,
October 1990, 98(5), pp. 922-943 (available on JSTOR).
4. Retirement
Borjas, Chapter 3, pp. 82 – 87.
B.
The Demand for Labor (9/12, 9/14)
Handout #2 Labor Demand
Question #2 due 9/12
The Production Function Question #4 due 9/14
Polachek and Siebert - "Marginal Productivity," pp. 8-12
Borjas - Chapter 4 #3 (Due: 9/14)
Daniel S. Hamermesh, Labor Demand, (Princeton University Press, 1993) is the classic book on labor
demand. (Optional)
C.
The Interaction of Supply and Demand: The Market
1. The Static Competitive Market (9/19)
Handout #2 Supply & Demand due 9/19
Polachek and Siebert - pp. 5-8
Borjas - Chapter 5 – pp 163-189
Katz, Lawrence and Kevin M. Murphy - "Changes in Relative Wages, 1963-1987: Supply and Demand
Factors," Quarterly Journal of Economics, February 1992, 107(1), pp. 35-78 (optional).
2. Minimum Wages
David Card andAlan B. Krueger (September 1994) "Minimum Wages and Employment: The Case of the
Fast Food Industry in New Jersey and Pennsylvania,” AER 84 (4): 772-936.
Finis Welch (September 1974) “Minimum Wage Legislation in the United States,” Economic Inquiry 12(3):
285-318.
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3. Stability in the Market (9/21)
Borjas – Chapter 5 pp 189-192
Freeman, Richard - "Supply and Salary Adjustments to the Changing Science Manpower Market: Physics
1948-1974," American Economic Review, March 1975, 65(1), 27-39 (available on JSTDR).
Borjas – Chapter 5 Problem #5 (Due 9/21)
* * * Q U I Z # 1 * * * Tuesday, September 26, 2006
D.
Imperfect Competition and Union Membership (9/28, 10/ 3, and 10/5)
Polachek and Siebert - Chapter 10
Borjas – Chapter 5, pp. 193-201
Borjas - Chapter 11, pp. 400-422.
Borjas – Chapter 5 Problem #5 (Due 10/3)
Borjas – Chapter 11, Problem #1 (Due 10/3)
“Updating the Reasons for the Union Decline,@Fact & Fallacy, May 1998, Employment Policy
Foundation, pp. 1-3 (available on internet at: htt://www.epf.org/research/newsletters/1998/ff4-5.asp).
III. THE LIFE CYCLE APPROACH
A.
Spot Market Idiosyncrasies (10/10)
Polachek and Siebert - Chapter 1, pp. 1-5 and 12-15.
B.
Information/Search/Unemployment (10/10)
Handout #3a (Search and Investment) Problems 1 and 2 (Due 10/12)
Polachek and Siebert - Chapter 8, pp. 210-216 and 232-283.
Borjas - Chapter 13, pp. 476-499
Problem #3 (Chapter 13) Due 10/12
Ehrenberg, Ronald and Ronald Oaxaca - "Unemployment Insurance, Duration of Unemployment and
Subsequent Wage Gains," American Economic Review, December 1976, 66(5), pp. 754-766. (available on
line)*3/8/2016
C.
Investment in Human Capital
1. Present Value (10/12)
Polachek and Siebert - Appendix to Chapter 2.
Handout #3a (Notes on Investment)
Borjas – Chapter 9, pp 314-316
2. The Dichotomous Investment Decision: Migration and Schooling (10/12)
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Handout #3b: Question #1 (Due 3/23)
Polachek and Siebert - Chapter 2, pp. 20-22; and Chapter 3, pp. 42-45.
Borjas - Chapters 7 and 9
3. Divisible Investment: Investment Over the Life Cycle (10/17)
a) Investment Costs
Polachek and Siebert - Chapter 2, pp. 22-35.
b) Investment Benefits
Polachek and Siebert - Chapter 3, pp. 39-42.
c) Optimal Investment Over the Life Cycle and Wage Predictions
Handout #4 Question #1A (Due 10/19)
4. Empirical Specification: The Earnings Function (10/19)
Handout #3b (The Earnings Function) Questions due: 10/24
Polachek and Siebert - Chapter 4, pp. 71-82 and 88-95.
Murphy, Kevin and Finis Welch - "Empirical Age-Earnings Profiles," Journal of Labor Economics, April
1990, 8(2), pp. 202-229. [optional]
5. Demographic Differences in Earnings (10/19)
Polachek and Siebert - Chapter 4, pp. 82-86.
Borjas – Chapter 8 (Optional)
a) Unions and the Earnings Profile
Borjas - Chapter 11, pp. 428-435
Boskin, Michael - "Unions and Relative Real Wages," American Economic Review, 1972, pp. 466-472.
(Optional)
Linneman, Peter, Michael Wachter, and William Carter - AEvaluating the Evidence on Union Employment
and Wages,@ Industrial and Labor Relations Review, October 1990, 44(1), pp. 34-53 [optional].
Francis Vella and Marna Verbeek "Whose Wages Do Unions Raise? A Dynamic Model of Unionism and
Wage Rate Defermination for Young Men" Journal of Applied Econometrics (Manda-April 1998) 13
(2):163-83 [optional].
b) Race (10/24)
Welch, Finis - ABlack-White Differences in Returns to Schooling,@ American Economic Review, December
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1973, 63(5), pp. 893-907.* (available on the web)
Card, David and Alan Krueger - ASchool Quality and Black-White Relative Earnings: A Direct
Assessment,@ Quarterly Journal of Economics, February 1992, 107(1), pp. 151-200. (available on the
web)
c) Gender
Hellerstein, Judith and David Neumark - "Sex, Wages, and Productivity: An Empirical Analysis of Israeli
Firm-Level Data," International Economic Review, February 1999, 40(1), pp. 95-124. [optional]
d) Health
Bartel, Ann and Paul Taubman - AHealth and Labor Market Success,@ Review of Economics and Statistics,
February 1979, 61(1), pp. 1-8. (available on JSTOR)
French, Michael and Gary Zarkin - AIs Moderate Alcohol Use Related to Wages? Evidence from Four
Worksites,@ Journal of Health Economics, August 1995, 14(3), pp. 319-344 [optional] .
e) Wage Inequality and Skills (optional)
Alan Krueger, “How Computers Have Changed the Wage Structure: Evidence from Microdata 1984 –
1989”, Quarterly Journal of Economics, (February 1993) 108 (1): 33-61. (optional)
f) College Athletics and Earnings
D. Henderson, A. Olbrecht, and S. Polachek (December 2005) “Do Former College Athletes Earn More at
Work?” IZA Discussion Paper No. 1882.
g) Ability and the Rate of Return to Education (10/26)
Paul Taubman, (December 1976) “The Determinants of Earnings: Genetics, Family, and Other
Environments: A study of White Male Twins,” AER 66(5): 858-870 (available on JSTOR).
Orley Ashenfeller and Alan Krueger (1994) “Estimates of the Economic Return to Schooling From a New
Sample of Twins” American Economic Review 84 (5): 1157-1173. (available on line)
Ashenfelter, Orley and Cecilia Rouse - AIncome, Schooling, and Ability: Evidence from A New Sample of
Identical Twins,@ Quarterly Journal of Economics, February 1998, 113(1), 253-269. (available on line)
h) Incomplete Information (10/31)
Polachek and Siebert - Chapter 8, pp. 238-242.
Hofler, Richard and Solomon Polachek (1985) – “A New Approach for Measuring Wage Ignorance in the
Labor Market,@ Journal of Economics and Business, 37, pp. 267-276.
Polachek, Solomon and John Robst (1998) - AEmployee Labor Market Information: Comparing Direct
World of Work Measures of Workers= Knowledge to Stochastic Frontier Estimates@ Labour Economics
5(2), pp. 231-242. (available on line)
S. Polachek and J. Xiang (September 2005), “The Effects of Incomplete Employee Wage Information: A
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Cross-Country Analysis” IZA Discussion Paper #1735 (available on line)*
* * * Q U I Z # 2 * * * Thursday, November 2, 2006
IV - EXTENSION OF THE LIFE CYCLE HUMAN CAPITAL MODEL
A.
Gender in the Market (11/7 and 11/9)
Polachek and Siebert - Chapter 6
Borjas - Chapter 10
Handout #4 (Due 4/20)
Polachek, Solomon - "Discontinuous Labor Force Participation and Its Effect on Women's Market
Earnings," in C. Lloyd (ed.) Sex Discrimination and the Division of Labor, Columbia U. Press, 1975.*
Polachek, Solomon - "Human Capital and the Gender Earnings Gap: A Response to Feminist Critiques," in
Kuiper and Sup (eds.) Out of the Margin, Routledge Press, 1995.
Goldin, Claudia and Solomon Polachek - AResidual Differences by Sex: Perspectives on the Gender Gap in
Earnings,@ American Economic Review, 77(2), 143-151. (optional)
Polachek, Solomon (April 2004) “How the Human Capital Model Explains Why the Gender Wage Gap
Narrowed,” IZA Working Paper #1102*.
Polachek, Solomon and John Robst - ATrends in the Male-Female Wage Gap: the 1980s Compared to the
1970s.@ Southern Economic Journal, April 2001. (optional)
Bayard, Kimberly, Judith Hellerstein, David Neumark, and Kenneth Troske - ANew Evidence on Sex
Segregation and Sex Differences in Wages From Matched Employee-Employer Data,@ National Bureau of
Economic Research, Working Paper 7003. (Optional)
B.
Heterogenous Human Capital (11/14)
Polachek and Siebert - Chapter 7
Polachek, Solomon - "Occupational Segregation: An Alternative Approach," Journal of Contemporary
Business, Winter 1976.*
Polachek, Solomon - "Occupational Self-Selection: A Human Capital Approach", Review of Economics and
Statistics, February 1981, 63(1), pp. 60-69. (optional)
V. Audit Studies (11/16)
Nelson, Philip and Solomon Polachek (1995) “Discerning Discrimination: Does Interviewing Firms Make
a Difference?” Eastern Economic Journal 21(3): 393-399.
Goldin, Claudia and Cecilia Rouse (2000) “Orchestrating Impartiality: The Impact of ‘Blind’ Auditions on
Female Musicians,” American Economic Review 90(4): 715-772.
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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.
VI. EFFORT INDUCING WAGE PAYMENT SCHEMES (11/21, 11/28, 11/30)
Polachek and Siebert - Chapter 9
Borjas - Chapter 12
Peter Cappell and Keith Chauvin (August 1991) An Interplant Test of the Efficiency Wage Hypothesis”
QJE 106 (3): 769-787.
Ronald G. Ehrenberg and Michael Bognanno (Dec. 1990) “Do Tournaments Have Incentive Effects?” JPE
98 (6): 1307-24.
S. Polachek (March 1980) “Conflict and Trade” Journal of Conflict Resolution 24 (1): 55-78*
S. Polachek (Fall 2002) “Trade Based Interactions: An Interdisciplinary Perspective,” Conflict
Management and Peace Science 19 (2): 1-22
S. Polachek (October 2003), “ What Can We Learn About the Decline in US Union Membership from
International Data” IZA Discussion Paper #896 (available at: www.IZA.org) also in P. Wunnava, The
Changing Role of Unions, ME Sharp Press.
Polachek, Solomon - "Earnings Over the Life Cycle: What Do Human Capital Models Explain?" Scottish
Journal of Political Economy, August 1995, 42 (3), pp. 1-23.
**** Q U I Z #3 **** -- Tuesday, December 5, 2006
Review & Questions: December 7, 2006
**** F I N A L E X A M ****
ECONOMICS DEPARTMENT POLICY REGARDING MAKE-UP FINAL EXAMS
ALL make-up final exams in Economics will be given Friday, December 15
from 11:00 AM to 1:00 PM. Currently all officially scheduled final
exams are listed in the BUSI system - check it NOW for conflicts. If
a conflict exists you may request a make-up exam from the instructor
of any of the conflicting courses.
If you choose to request a makeup exam for this course, a sign-up list to request the make-up exam
will be available in class – ask the instructor. Students MUST make
their request for a make-up exam in economics NO LATER THAN FRIDAY,
October 6.
Students will be notified IN CLASS before the drop
deadline. It is the student’s responsibility to learn from the
instructor if the request has been approved. Only students who are
approved may take a make-up final exam.
Students who have not
requested a make-up exam in an economics course by October 6 will be
required to resolve conflicting exams with the instructor in one of
their other courses.
Make-up exams are approved ONLY for the following conditions:
- Conflicts with the OFFICIAL final exam schedule (e.g. exams at
the same time or more than two exams within 24 hours).
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- DOCUMENTED personal illness or family emergency.
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