Econ 590 Topics in Labor: Modeling the Labor Market Prof. Eliza Forsythe
Logistics
Two lectures per week on Monday and Wednesdays from 2 to 3:20 pm in 317 David Kinley Hall.
Description
This is a graduate course in labor economics, appropriate for PhD students in the Department of Economics and other students with permission of the instructor. The focus of the course is theoretical models used in labor economics, and the aim is to both acquaint students with canonical models in the eld, as well as to encourage the development of the applied-micro modeling skills necessary to produce theoretical models that support empirical research. Although theory will be the emphasis, we will also cover related empirical literature. The syllabus contains readings of two sorts. Readings with stars will be emphasized in lectures. Other readings may be discussed brie y, but are also listed as a guide to the literature. The Compass website has readings and other course materials. Students who are interested in pursuing research in labor eco- nomics or other applied micro elds are strongly encouraged to attend the weekly student workshop, which meets on Tuesdays from 12:30-1:30 pm and the applied micro seminar which meets Mondays and occasional Wednesdays from 3:30 to 5 pm.
Course Materials
Most required readings will be available via links on the course website. Many readings will be drawn from David Autor and Daron Acemoglu's Lectures in Labor Economics (denoted AA below) and the Handbook of Organizational Economics, both of which are available electronically via the course website. There is one book I recommend you purchase:
Christopher Pissarides. Equilibrium Unemployment Theory. MIT Press, 2000 however it is also available electronically via a link on the course website. In addition, you may nd it helpful to have access to:
George Borjas. Labor Economics. McGraw Hill-Irwin, 5th edition, 2010
Derek Laing. Labor Economics: Introduction to Classic and the New Labor Economics. W.W. Norton & Company, 2011
1 Grading and Requirements
The course is comprised of three modules: micro-labor models, personnel/organizational models, and macro/ matching models. There will be one problem set for each module. In addition, for each module, you will work in groups of 2-3 to study in depth a single paper and present this to the class in presentations of 30-45 minutes. Finally, you will each individually complete a term project that involves developing a model that can either be used to explain empirical results you have already developed or anticipate developing, or results from the literature. More information on the group and term projects will be provided in class. The grade will be comprised of 30% problem sets, 20% paper presentations, and 50% term project.
Course Readings
Module 0: Introduction
F Paul Krugman. How I Work. In Michael Szenberg, editor, Passions and Craft: Economists at Work. 1997
Hal Varian. Building an economic model in your spare time. 1994
W.. Thomson. The young person's guide to writing economic theory. Journal of Economic Literature, 37(1):157183, 1999
Module A: Micro Labor Models
1. The Basic Property-Rights Model
F AA, Chapter 6
Sanford Grossman and Oliver Hart. The costs and bene ts of ownership: A theory of vertical and lateral integration. Journal of Political Economy, 94(2):691719, 1986
Oliver Hart and John Moore. Property rights and the nature of the rm. Journal of Political Economy, 98:11191158, 1990
Paul Grout. Investment and wages in the absence of binding contracts: A nash bargaining ap- proach. Econometrica, 52:449460, 1984
Ilya Segal and Michael Whinston. Property Rights. In R. Gibbons and J. Roberts, editors, The Handbook of Organizational Economics. Princeton University Press, 2012. Forthcoming
2. Investment in General Skills
F AA, Chapter 8
Gary Becker. Human Capital. The University of Chicago Press, 1964
2 Daron Acemoglu and Steve Pischke. Why do rms train. Quarterly Journal of Economics, 113 (1):79119, 1998
Daron Acemoglu and Steve Pischke. The structure of wages and investment in general training. Journal of Political Economy, 107:539572, June 1999
David H. Autor. Why do Temporary Help Firms Provide Free General Skills Training? Quarterly Journal of Economics, 116(3):14091448, 2001
3. Speci c Capital
F AA, Chapter 9
F Canice Prendergast. The role of promotion in inducing speci c human capital acquisition. Quar- terly Journal of Economics, 108(2):523534, 1993
F Edward Lazear. Firm-speci c human capital: A skill weights approach. 2003. NBER Working Paper No. 9679
4. Measuring Human Capital
Abraham Katherine and Henry Farber. Job duration, seniority, and earnings. American Economic Review, pages 278297, 1986
F Topel Robert. Speci c capital, mobility, and wages: Wages rise with job seniority. Journal of Political Economy, 99(1):145176, 1991
F Louis Jacobson, Robert LaLonde, and Daniel Sullivan. Earning losses of displaced workers. Amer- ican Economic Review, 83:685709, 1993
5. Firm Learning
F Henry Farber and Robert Gibbons. Learning and wage dynamics. Quarterly Journal of Economics, 111:107147, 1996
F Boyan Jovanovic. Job matching and the theory of turnover. Journal of Political Economy, pages 972990, 1979
Module B: Personnel Models
Overviews and Background
F Canice Prendergast. The provision of incentives in rms. Journal of Economic Literature, 28:763, 1999
Robert Gibbons. Incentives between rms (and within). Management Science, 51:217, 2005. Sections 14
3 Robert Gibbons and John Roberts. Economic Theories of Incentives in Organizations. In R. Gibbons and J. Roberts, editors, The Handbook of Organizational Economics. Princeton University Press, 2012a
Edward Lazear and Paul Oyer. Personnel Economics. In R. Gibbons and J. Roberts, editors, The Handbook of Organizational Economics. Princeton University Press. Forthcoming
Casey Ichniowski and Kathryn Shaw. Insider Econometrics: A Roadmap to Estimating Empirical Models of Organizational Performance. In R. Gibbons and J. Roberts, editors, The Handbook of Organizational Economics. Princeton University Press. Forthcoming
Erik Brynjolfsson and Paul Milgrom. Complementarity in Organizations. In R. Gibbons and J. Roberts, editors, The Handbook of Organizational Economics. Princeton University Press. Forthcoming
1. Formal Incentive Contracts
F Robert Gibbons and John Roberts. Economic Theories of Incentives in Organizations. In R. Gib- bons and J. Roberts, editors, The Handbook of Organizational Economics. Princeton University Press, 2012b. Section 2
Bengt Holmstrom. Moral hazard and observability. Bell Journal of Economics, 10:7491, 1979
Edward Lazear and Sherwin Rosen. Rank-order tournaments as optimal labor contracts. Journal of Political Economy, 89:841864, 1981
Bengt Holmstrom. Moral hazard in teams. Bell Journal of Economics, 13:324340, 1982a
F Bengt Holmstrom and Paul Milgrom. Multitask principal-agent analyses: Incentive contracts, asset ownership, and job design. Journal of Law, Economics and Organization, 7:2452, 1991
George Baker. Incentive contracts and performance measurement. Journal of Political Economy, 100:598614, 1992
Gerald Feltham and Jim Xie. Performance measure congruity and diversity in multi-task princi- pal/agent relations. The Accounting Review, 69:429453, 1994
F Edward Lazear. Performance pay and productivity. American Economic Review, 90:13461361, 2000
F Paul Oyer. Fiscal year ends and nonlinear incentive contracts: The eect on business seasonality. Quarterly Journal of Economics, 113:149185, 1998
Canice Prendergast. The Tenuous Trade-O between Risk and Incentives. Journal of Political Economy, 110(5):10711102, 2002
2. Relational Incentive Contracts
Clive Bull. The existence of self-enforcing implicit contracts. Quarterly Journal of Economics, 102:147159, 1987
4 Jonathan Levin. Relational incentive contracts. American Economic Review, 93:835857, 2003
James Malcomson. Relational Incentive Contracts. In R. Gibbons and J. Roberts, editors, The Handbook of Organizational Economics. Princeton University Press, 2012. Forthcoming
3. Career Concerns
F Bengt Holmstrom. Managerial Incentive ProblemsA Dynamic Perspective. In Essays in Eco- nomics and Management in Honor of Lars Wahlbeck. Swedish School of Economics, Helsinki, 1982b. Republished in Review of Economic Studies 66 (1999): 169182
Daron Acemoglu, Michael Kremer, and Atif Mian. Incentives in markets, rms and governments. Journal of Law, Economics and Organizations, December 2007
F Robert Gibbons and Kevin J Murphy. Optimal incentive contracts in the presence of career concerns: Theory and evidence. Journal of Political Economy, 100(3):468505, 1992
Judith Chevalier and Glenn Ellison. Career concerns of mutual fund managers. Quarterly Journal of Economics, 114:389432, 1999
4. Task Assignment
F Michael Waldman. Job assignment, signaling, and e ciency. RAND Journal of Economics, 15: 255287, 1984
Paul Milgrom and Sharon Oster. Job discrimination, market forces, and the invisibility hypothesis. Quarterly Journal of Economics, 102:453476, 1987
5. Careers and Employment Systems
Michael Waldman. Theory and Evidence in Internal Labor Markets. In R. Gibbons and J. Roberts, editors, The Handbook of Organizational Economics. Princeton University Press, 2012. Forthcom- ing
F George Baker, Michael Gibbs, and Bengt Holmstrom. The internal economics of the rm: Evidence from personnel data. Quarterly Journal of Economics, 109:881919, 1994a
George Baker, Michael Gibbs, and Bengt Holmstrom. The wage policy of a rm. Quarterly Journal of Economics, 109:921955, 1994b
F Robert Gibbons and Michael Waldman. A theory of wage and promotion dynamics inside a rm. Quarterly Journal of Economics, 114(4):13211358, 1999
F Eliza Forsythe. Occupational Job Ladders and the E cient Reallocation of Displaced Workers. 2017a Eliza Forsythe. Careers within Firms: Occupational Mobility Over the Lifecycle. 2018
5 Casey Ichniowski and Kathryn Shaw. Insider Econometrics: Empirical Studies of How Manage- ment Matters. In R. Gibbons and J. Roberts, editors, The Handbook of Organizational Economics. Princeton University Press, 2012. Forthcoming
F Casey Ichniowski, Kathryn Shaw, and Giovanna Prennushi. The eects of human resource man- agement practices on productivity: A study of steel nishing lines. American Economic Review, 87:291313, 1997
Paul Milgrom and John Roberts. The economics of modern manufacturing: Technology, strategy and organization. American Economic Review, 80:511528, 1990
6. E ciency Wages, Unemployment and Organization of the Firm
F AA, Chapter 7
F Carl Shapiro and Joseph Stiglitz. Unemployment as worker discipline device. American Economic Review, 1984
Module C: Macro and Matching Models
Overviews and Classics:
F Christopher Pissarides. Equilibrium Unemployment Theory. MIT Press, 2000
F Richard Rogerson, Robert Shimer, and Randall Wright. Search models of the labor market: A survey. Journal of Economic Literature, 43:959988, 2004
Truman Bewley. Why Wages Don't Fall During a Recession. Harvard University Press, 1999
1. Facts about the Labor Market and Hiring
F Michael Elsby, Bart Hobjin, and Aysegul Sahin. The labor market in the great recession. spring 1-40, 1994. OECD (1994); Jobs Study Volumes 1 and 2
Olivier Blanchard and Peter Diamond. The beveridge curve. 1989:1:160, 1989
Steve Nickell. Unemployment and Labor Market Rigidities: Europe versus North America. Journal of Economic Perspectives, 11:5574, 1997
F Edward Lazear and Paul Oyer. Personnel Economics. In R. Gibbons and J. Roberts, editors, The Handbook of Organizational Economics. Princeton University Press, 2012. Section 3
2. The Partial Equilibrium Search Model
F AA, Chapter 10
F Richard Rogerson, Robert Shimer, and Randall Wright. Search models of the labor market: A survey. Journal of Economic Literature, 43:959988, 2004
6 3. The Basic Equilibrium Search Framework
F AA, Chapter 11
F Pissarides [2000, Chapters 1, 2 and 8]
Arthur Hosios. On the e ciency of matching and related models of search and unemployment. Review of Economics Studies, 57(2):279298, 1990
F Dale Mortensen and Christopher Pissarides. Job creation and job destruction in the theory of unemployment. Review of Economic Studies, 61:397416, 1994
F Eliza Forsythe. Why Don't Firms Hire Young Workers During Recessions? 2017b
4. Directed Search
AA, Chapter 13
F Richard Rogerson, Robert Shimer, and Randall Wright. Search models of the labor market: A survey. Journal of Economic Literature, 43:959988, 2004[Section 5]
B. Petrongolo and C. A.. Pissarides. Looking into the Black Box: A Survey of the Matching Function. Journal of Economic Literature, 39(2):390431, 2001
E. R. Moen. Competitive search equilibrium. Journal of political Economy, 105(2):385411, 1997
5. Assignment Models
F M. Sattinger. Assignment models of the distribution of earnings. Journal of Economic Literature, pages 831880, 1993
F Mark Tervio. The Dierence that CEOs Make: An Assignment Model Approach. American Economic Review, 98(3), 2008
6. Job Ladders
F Giuseppe Moscarini and Fabien Postel-Vinay. Did the Job Ladder Fail After the Great Recession? Journal of Labor Economics, 34(1), 2015
F Dale T. Mortensen Kenneth Burdett. Wage dierentials, employer size, and unemployment. In- ternational Economic Review, 39(2):257273, 1998
F Gadi Barlevy. The Sullying Eect of Recessions. Review of Economic Studies, 69(1):6596, 2002
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