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Econ 590 Topics in Labor: Modeling the Labor Market Prof. Eliza Forsythe [email protected] 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 briey, 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 benets 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. Specic Capital F AA, Chapter 9 F Canice Prendergast. The role of promotion in inducing specic human capital acquisition. Quar- terly Journal of Economics, 108(2):523534, 1993 F Edward Lazear. Firm-specic 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. Specic 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 eciency. 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.
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