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LABOUR AND PERSONNEL ECONOMICS

Syllabus

EN IT

Learning Objectives

LEARNING OUTCOMES: The main goal of the course is to introduce the student to the main concepts of Labor Economics, with both a theoretical and an empirical approach. The course deals with the theoretical problems related to the behavior of workers and firms when determining wages and employment; additionally, it introduces the student to the empirical methodology applied to the labor market problems. Particular attention is given to issues related to the economics of education. The course also covers topics in human resource management and industrial relations.
KNOWLEDGE AND UNDERSTANDING: The final goal is to gain knowledge of the analytical tools to study and understand labor markets.
APPLYING KNOWLEDGE AND UNDERSTANDING: As a result, students will acquire the tools to study and understand labor market policies and operate in the field of labor economics.
MAKING JUDGEMENTS: At the end of the course, the student will have acquired the theoretical and methodological tools to analyze and understand the labor market both in its structural characteristics and in its recent developments. She will also have gained familiarity with the tools necessary to design, implement and evaluate labor policies.
COMMUNICATION SKILLS: Students must be able to use the tools learned during the course to interpret the labor market phenomena.
LEARNING SKILLS: Students must acquire the technical language typical of labor economics to elaborate in a clear and unambiguous way the concepts learned during the course.

Prerequisites

The student should have covered the material of a good undergraduate economics
program: a good working knowledge of advanced microeconomics (we will make almost no
use of macroeconomics), mathematics, as a basic understanding of econometrics, at least
multiple regression (the student should understand how to interpret regression coefficients
and be aware of possible pitfalls in their use) and STATA practice.

Program

Labor supply (retirement, family), labor demand, labor market equilibrium (minimum wages,
payroll taxes, immigration, wage distribution), education (human capital, signaling),
discrimination (race, gender), pay based on performance (piece-rate, team),
unemployment.

Books

The material for this course (syllabus, notes, announcements, materials) will be posted on
the course webpage. No single textbook covers all the material presented in this course. A
number of the recommended readings will consist of journal articles. The books that will be
used more frequently are the following:
- One suggested text is Borjas, “Labor Economics”, McGraw-Hill, 2010. (previous and new
editions can also be used). The textbook is an undergraduate-level textbook, so the
coverage of the material will be a bit less advanced than what will be done in class.
- A graduate-level text in labor economics is Cahuc, Carcillo and Zylberberg, “Labor
Economics”, MIT Press, 2004 (new editions can also be used).
- Labor economics is a data-intensive field, and many new empirical techniques have been
developed to answer labor economics questions. The reference book is: Angrist and
Pischke, “Mostly Harmless Econometrics”, Princeton University Press, 2009.
All readings are available through the Biblioteca Vilfredo Pareto, located in the building B.
Class notes, as well as any other additional material/reading, will be available on the course
web page.

Bibliography

This list is indicative, and can be subject to some changes. In particular, further readings
may be provided during the lectures. Readings marked with a * (or with Required
Readings) represent compulsory reading, all other readings (or under Additional Readings)
are just suggestions.
Introduction and Methods
- Borjas (chapter 1)
- Angrist, J. D. and A. B. Krueger (1999): “Empirical Strategies in Labor Economics”, in
Handbook of Labor Economics, ed. Ashenfelter and Card, vol 3, North Holland,
Amsterdam.
Labor Supply
- Borjas (chapter 2)
- Imbens, G. W., D. B. Rubin and B. Sacerdote (2001): “Estimating the Effect of Unearned
Income on Labor Earnings, Savings, and Consumption: Evidence from a Survey of Lottery
Players.” American Economic Review, 91, 778-94.*
- Eissa, N. and J. B. Liebman (1996): “Labor Supply Response to the Earned Income Tax
Credit.” Quarterly Journal of Economics, 111, 605-37.*
- Krueger, A. and S. Pischke (1992): “The Effect of Social Security on Labor Supply: A
Cohort Analysis of the Notch Generation.” Journal of Labor Economics, 10, 412-437.*
Labor Demand
- Borjas (chapter 3)
- Hamermesh, D. S. (1986): “The Demand for Labor in the Long Run.” Handbook of Labor
Economics, vol. 1, pp. 429-71.
- Acemoglu, D.; Autor, D. H. and D. Lyle (2004): “Women, War, and Wages: The Effect of
Female Labor Supply on the Wage Structure at Midcentury.” Journal of Political Economy,
112, 497-551.*
Minimum Wage
- Borjas (chapter 3)
- Kennan, J. (1995): “The Elusive Effect of Minimum Wages.” Journal of Economic
Literature.
- Card, D. and A.B. Krueger (1994): “Minimum Wages and Employment: A Case Study of
the Fast-Food Industry in New Jersey and Pennsylvania.” American Economic Review, 84,
772-793.*
- Neumark, D. and W. Wascher (2006): “Minimum Wages and Employment: A Review of
Evidence from the New Minimum Wage Research.” NBER WP 12663.*
- Allegretto, S., Dube, A., Reich, M. and B. Zipperer (2013): “Credible Research Designs for
Minimum Wage Studies.” IZA DP 7638.
Payroll-taxes
- Borjas (chapter 4)
- Gruber, J. (1997): “The Incidence of Payroll Taxation.” Journal of Labor Economics, 15, 72-
101.
Immigration
- Borjas (chapter 4)
- Card, D. (1990): “The Impact of the Mariel Boatlift on the Miami Labor Market.”
Industrial and Labor Relations Review, 43, 245-57.*
- Borjas, G. J. (2003): “The Labor Demand Curve Is Downward Sloping: Reexamining the
Impact of Immigration on the Labor Market.” Quarterly Journal of Economics, 118, 1335-
1374.*
- Ottaviano G. and G. Peri (2012): “Rethinking the Gains from Immigration: Theory and
Evidence from the U.S.” Journal of the European Economic Association, 10, 152-197.*
Inequality
- Borjas (chapter 7)
- Atkinson, A., Piketty T. and E. Saez (2011): “Top Incomes in the Long Run of History.”
Journal of Economic Literature, 49, 3-71.*
- Autor, D. H., L. F. Katz and M. S. Kearney (2008): “Trends in U.S. Wage Inequality:
Revising
the Revisionists.” Review of Economics and Statistics, 90, 300-323.
- Autor, D. H., Dorn, D. and G. H. Hanson (2013): “The China Syndrome: Local Labor
Market Effects of Import Competition in the United States.” American Economic Review,
103, 2121-2168.*
- Krueger, A. B. (2005): “The Economics of Real Superstars: The Market for Rock Concerts
in the Material World.” Journal of Labor Economics, 23, 1-30.*
- Autor, D.H., Katz L.F. and A. B. Krueger (1998): “Computing Inequality: Have Computers
Changed the Labor Market?.” Quarterly Journal of Economics, 113, 1169-1213.*
Human Capital
- Borjas (chapter 6)
- Griliches Z. (1977) “Estimating the Returns to Schooling: Some Econometric
Problems” Econometrica, Vol. 45, No. 1, pp. 1-22
- Ashenfelter, O. and C. Rouse (1998) “Income, Schooling, and Ability: Evidence
from a New Sample of Identical Twins”, The Quarterly Journal of Economics, Vol. 113, No.
1, pp. 253-284*
- Angrist, J. D. and A. B. Krueger (1991) “Does Compulsory School Attendance Affect
Schooling and Earnings?” The Quarterly Journal of Economics Vol. 106, No. 4, pp. 979-
1014*
- Card, D (1995) “Using Geographic Variation in College Proximity to Estimate the
Return to Schooling”, In L.N. Christofides, E.K. Grant, and R. Swidinsky, editors, Aspects of
Labor Market Behaviour: Essays in Honour of John Vanderkamp, University of Toronto
Press, Toronto. http://davidcard.berkeley.edu/papers/geo_var_schooling.pdf*
- Griliches, Z. and M. William (1972): “Education, Income and Ability.” Journal of
Political Economy, 80, 74-103.
- Ashenfelter, O. and A. B. Krueger (1994): “Estimates for the Economic Returns to
Schooling for a New Sample of Twins.” American Economic Review, 84, 1157-1173.
- Altonji, J. G. and C. R. Pierret (2001): “Employer Learning and Statistical
Discrimination.” Quarterly Journal of Economics,
Signaling
- Card, D. “The Causal Effect of Education on Earnings”, Handbook of Labour
Economics, vol. 3, Chapter 30, eds. O. Ashenfelter and D. Card.
http://davidcard.berkeley.edu/papers/causal_educ_earnings.pdf*
- Tyler, J., R. Murnane, J. Willet (2000) “Estimating the Signaling Value of the GED”,
The Quarterly Journal of Economics, vol. 115, no.2, pp. 431-468.
http://www.jstor.org/stable/pdfplus/2586999.pdf*
- Lang, K. And D. Kropp (1986) “Human Capital Versus Sorting: The Effects of
Compulsory Attendance Laws”, The Quarterly Journal of Economics, vol. 101, no.3, pp.
609-624. http://faculty.smu.edu/millimet/classes/eco7321/papers/lang%20kropp.pdf
- Jaeger, D. A. and M. E. Page (1996): “Degrees Matter: New Evidence on Sheepskin
Effects in the Returns to Education.” Review of Economics and Statistics, 78, 733-740.
More on college investment
- Christopher Avery and Sarah Turner. 2012. “Student Loans: Do College Students
Borrow Too Much--Or Not Enough?” Journal of Economic Perspectives, 26(1): 165–92
- Hoxby, “The Return to Attending a More Selective College: 1960 to the Present,”
in Forum Futures: Exploring the Future of Higher Education”, eds. Maureen Devlin and
Joel Meyerson (Jossey-Bass Inc., 2001): 13-42.
- Hoekstra M. (2009) “The Effect of Attending the Flagship State University on
Earnings: A Discontinuity-Based Approach”, Review of Economics and Statistics 2009, 91
(4): 717-724*
- Cadena and Keys (2013) “Can Self-Control Explain Avoiding Free Money? Evidence
from Interest-Free Student Loans”, Review of Economics and Statistics 95 (4), 1117-1129
- Deming, Goldin and Katz (2012) “The For-Profit Postsecondary School Sector:
Nimble Critters or Agile Predators?” Journal of Economic Perspectives—Volume 26, Pages
139–164
- Lang, K. and Weinstein, R. (2013) “The Wage Effects of Not-for-Profit and For-
Profit Certifications: Better Data, Somewhat Different Results,” Labour Economics: 230-
43.
- Hoxby, Caroline, and Christopher Avery. forthcoming. "The Missing "One-offs":
The Hidden Supply of High-Achieving, Low Income Students," Brookings Papers on
Economic Activity. (Also NBER Working Paper 18586.)
- Bettinger, Eric, Bridget Long, Phil Oreopoulos and Lisa Sanbonmatsu, (2012) "The
Role of Simplification and Information: Evidence from the FAFSA Experiment.” Quarterly
Journal of Economics 127 (3), 1205-1242.
- Caroline Hoxby and Sarah Turner. 2013. “Expanding College Opportunities for
High-Achieving, Low Income Students”, SIEPR Discussion Paper 12-014*
Discrimination
- Borjas (chapter 9)
Facts
- Bertrand, Goldin and Katz, (2010) “Dynamics of the Gender Gap for Young
Professionals in the Financial and Corporate Sectors”, American Economic Journal:
Applied Economics 2: 228–255*
- Neal, Derek and Johnson, William. (1996) " The Role of Premarket Factors in Black-
White Wage Differences", Journal of Political Economy, Vol. 104, No. 5, pp. 869-895
- Fryer R, Levitt S. (2004) “Understanding The Black-White Test Score Gap in the First
Two Years of School”, The Review of Economics and Statistics. 86(2): 447–464
Theory
- Hamermesh and Biddle, (1994) “Beauty and the Labor Market”, The American
Economic Review, Vol. 84, No. 5, (Dec., 1994), pp. 1174-1194
- Phelps, (1972) “The Statistical Theory of Racism and Sexism”, The American Economic
Review, Vol. 62, No. 4, pp. 659-661
- Arrow, K.J., (1973). The Theory of Discrimination. In: Ashenfelter, O., Rees, A. (Eds.),
Discrimination in Labor Markets. Princeton University Press, pp. 3–33.
- Aigner, D., Cain, G., (1977) “Statistical Theories of Discrimination in the Labor Market”
Ind. Labor Relat. Rev. 30 (2), 175–187
Empirics
- Kerwin Kofi Charles & Jonathan Guryan, (2008). "Prejudice and Wages: An Empirical
Assessment of Becker's The Economics of Discrimination," Journal of Political Economy,
University of Chicago Press, vol. 116(5), pages 773-809
- Sandra E. Black and Philip E. Strahan (2001) “The Division of Spoils: Rent-Sharing and
Discrimination in a Regulated Industry” The American Economic Review Vol. 91, No. 4, pp.
814-831
- Levine, R., A. Levkov and Y. Rubinstein (2009), Racial Discrimination and Competition,
Working Paper 14273
- Goldin C. and C. Rouse (2000) Orchestrating Impartiality: The Impact of "Blind"
Auditions on Female Musicians, American Economic Review , vol 90 (4): 715-741*
- Marianne Bertrand and Sendhil Mullainathan (2004) “Are Emily and Greg More
Employable than Lakisha and Jamal? A Field Experiment on Labor Market Discrimination”,
The American Economic Review, Vol. 94, No. 4, pp. 991-1013*
Incentive Contracts
- Borjas (chapter 11)
- Lazear, E. P., (2000): “Performance Pay and Productivity.” American Economic Review, 90,
1346-1361.*
- Falk, A., and A. Ichino (2006) “Clean Evidence on Peer Effects.” Journal of Labor
Economics
24, no. 1: 39-57.
- Mas, A and E. Moretti, (2009), “Peers at Work”, American Economic Review 99(1), 112-45
- Bandiera, O., I. Barankay, and I. Rasul. (2005) “Social Preferences and the Response to
Incentives: Evidence from Personnel Data.” Quarterly Journal of Economics 120, no. 3:
917-962*

Teaching methods

Lessons and practices in class

Exam Rules

The final exam is a two-hours written test consisting of four questions (mathematical
exercises, possibly the discussion of an article chosen among those discussed in class).
Within each question there might be a choice of "subquestions". To pass the exam it is
necessary to obtain a mark of 18 in at least three questions. The mark for the written exam
is given by the average mark of the four questions. In each question the scale of marks goes
from 0 to 34, so students can obtain a final mark of 30 even without answering all the
questions perfectly. Questions are aimed at assessing whether the student has acquired a
solid knowledge of the functioning of a modern labor market, both from a theoretical and an
empirical point of view, with a special attention to the recent developments. There is one
exam in the Summer and Fall sessions (also a midterm exam right after the end of the
course). In the Winter term there are two exams but you can sit only in one. Additionally,
students can volunteer to give presentations and have their mark added to the mark of the