ECO 731 Labor Economics I Professor James P. Ziliak MW: 3:00pm-4:15pm Gatton 233 Fall 2016 Office: Gatton Suite 234 Office Hours: MW 4:30pm-5:30pm Office Phone: 257-6902 E-mail: [email protected] Web Page: http://sites.google.com/site/jamesziliak/ Course Objectives This course is the first of a two-term sequence on labor economics. The emphasis in this term is on the supply of labor and on the quality of labor. In the theory of labor supply emphasis will be placed on deriving structural utility parameters that are useful in labor-market policies toward taxes and social policy. For the quality of labor a model of human capital will be derived, which will then be linked into issues surrounding the distribution of earnings including the returns to schooling and experience, poverty, and income inequality and volatility. Throughout the course we will discuss in detail recent methods in the econometric evaluation of programs. The modeling techniques acquired in this course should prepare the student to pursue advanced research in empirical economics. Course Requirements There will be (empirical) homework projects (80%), and a referee report (20%). Reading Requirements The key required readings for the course are listed below. Within each subsection I highlight important readings that lectures will also draw from. Moreover, an attached appendix provides a more extensive reading list. For those with no previous course in labor economics I also recommend that you pick up an undergraduate labor text by Borjas, or Ehrenberg and Smith. Labor Supply: Keane, Michael. 2011. “Labor Supply and Taxes: A Survey,” Journal of Economic Literature 49:4(pp. 961-1016; 1025-1031). Program Evaluation and Labor Econometrics: Blundell, Richard and Monica Costa Dias. 2009. “Alternative Approaches to Evaluation in Empirical Microeconomics.” Journal of Human Resources, 44(3): 565-640. Kniesner, Thomas J., and James P. Ziliak. 2014. “Panel Econometrics of Labor Market Outcomes.” In The Oxford Handbook of Panel Data, B. Baltagi (ed.), Oxford, UK: Oxford University Press, 585-609. Human Capital: Heckman, James J., Lance Lochner, and Petra Todd. 2006. “Earnings Functions, Rates of Return, and Treatment effects: The Mincer Equation and Beyond.” Handbook of Economics of Education, Vol 1, E. Hanushek and F. Welch (eds), Amsterdam: Elsevier, pp. 307-326;364-370. Course Outline 1. Background: History, Concepts, Trends, and Measurement in Labor Economics Aguiar, Mark, Erik Hurst, and Loukas Karabarbounis. 2012. “Recent Developments in the Economics of Time Use.” Annual Review of Economics. Boyer, George, and Robert Smith. 2001. “The Development of the Neoclassical Tradition in Labor Economics.” Industrial and Labor Relations Review 54:2, 199-223. Bollinger, Christopher R. and Barry T. Hirsch. 2006. “Match Bias from Earnings Imputation in the Current Population Survey: The Case of Imperfect Matching.” Journal of Labor Economics 24: 483-519. Bound, John, Charles Brown, and Nancy Mathiowetz. 2001. “Measurement Error in Survey Data.” In E. E. Leamer and J. J. Heckman (eds.), Handbook of Econometrics, Vol. 5, Amsterdam: North Holland: 3705-3843. Gottschalk, Peter, and Robert Moffitt. 2009. “The Rising Instability of U.S. Earnings.” Journal of Economic Perspectives 23(4): 3-24. Hokayem, Charles, Christopher Bollinger, and James P. Ziliak. 2015. “The Role of CPS Nonresponse on the Level and Trend in Poverty.” Journal of the American Statistical Association 110(511): 935-945 Kaplan, Greg, and Sam Schulhofer-Wohl. 2012. “Interstate Migration Has Fallen Less Than You Think: Consequences of Hot Deck Imputation in the Current Population Survey.” Demography 49: 1061-1074. Wasserstein, Ronald L., and Nicole A. Lazar. 2016. “The ASA’s Statement on P-values: Context, Process, and Purpose.” The American Statistician, DOI: 10.1080/00031305.2016.1154108 . Ziliak, James P. 2006. “Understanding Poverty Rates and Gaps: Concepts, Trends, and Challenges.” Foundations and Trends in Microeconomics 1: 127–199. Ziliak, James P. 2015. “Income, Program Participation, Poverty, and Financial Vulnerability: Research and Data Needs.” Journal of Economic and Social Measurement 40(1-4): 27-68. II. The Supply of Labor A. Static Labor Supply Blundell, Richard and Thomas MaCurdy. 1998. “Labour Supply: A Review of Alternative Approaches.” Institute for Fiscal Studies W98/18. Sec 1–3; 4.0–4.2, 4.4–4.4.1 Moffitt, Robert. 2002. “Welfare Programs and Labor Supply.” NBER Working Paper 9168. Mroz, Thomas A. (1987). "The Sensitivity of an Empirical Model of Married Women's Hours of Work to Economic and Statistical Assumptions," Econometrica 55:4, pp. 765-799. B. Life-Cycle Labor Supply Blundell, Richard and Thomas MaCurdy. 1998. “Labour Supply: A Review of Alternative Approaches.” Institute for Fiscal Studies W98/18. Sec 4.2–4.3, 4.4.2–4.5 Ziliak, James P. and Thomas J. Kniesner. 2005. “The Effect of Income Taxation on Consumption and Labor Supply.” Journal of Labor Economics, 23(4): 769–796. MaCurdy, Thomas E. (1981). "An Empirical Model of Labor Supply in a Life-Cycle Setting," Journal of Political Economy 89:6, 1059-1085. III. Econometrics of Program Evaluation Blundell, Richard and Thomas MaCurdy. 1998. “Labour Supply: A Review of Alternative Approaches.” Institute for Fiscal Studies W98/18. Sec 5 Deaton, Angus. 2010. “Instruments, Randomization, and Learning about Development” Journal of Economic Literature 48(2): 424–455. (especially pp. 424-432). Heckman, James. 2010. “Building Bridges Between Structural and Program Evaluation Approaches to Evaluating Policy” Journal of Economic Literature 48(2): 356–398. (especially pp. 356-369). Lee, David, and Thomas Lemieux. 2010. “Regression Discontinuity Designs in Economics” Journal of Economic Literature 48(2): 281–355. (especially pp. 356-369). Moffitt, Robert. 2005. “Remarks on the Analysis of Causal Relationships in Population Research.” Demography 42(1): 91–108. IV. Human Capital Card, David. 2001. “Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems.” Econometrica 69:5, 1127–1160. Polochek, Solomon. 2007. “Earnings over the Lifecycle: The Mincer Earnings Function and its Applications.” Foundations and Trends in Microeconomics, Vol 4, No 3. (especially Sections I-VI) V. Poverty, Inequality, Mobility, and Social Policy Aizer, Anna, and Janet Currie. 2014. “The Intergenerational Transmission of Inequality: Maternal Disadvantage and Health at Birth.” Science 344(6186): 856-861. Attanasio, Orazio, and Luigi Pistaferri. 2016. “Consumption Inequality.” Journal of Economic Perspectives, 30(2): 1-27. Autor, David, Lawrence Katz, Melissa Kearney. 2008. “Trends in U.S. Wage Inequality: Revising the Revisionists.” Review of Economics and Statistics, 90(2): 300-323. Autor,David, David Dorn, and Gordon Hanson. 2013. “The China Syndrome: Local Labor Market Effects of Import Competition in the United States,” American Economic Review, 103(6): 2121-2168. Bitler, Marianne, and Hilary Hoynes. 2010. “The State of the Safety Net in the Post-Welfare Reform Era.” Brookings Papers on Economic Activity Blundell, Richard, Luigi Pistaferri, and Itay Saporta-Eksten. 2016. “Consumption Inequality and Family Labor Supply.” American Economic Review, 106(2): 387-435. Burkhauser, Richard V., Shuaizhang Feng, Stephen P. Jenkins, and Jeff Larrimore. 2012. “Recent Trends in Top Income Shares in the USA: Reconciling Estimates from March CPS and IRS Tax Return Data.” Review of Economics and Statistics 94: 371-388. Card, David, and John DiNardo. 2002. “Skill-Biased Technological Change and Rise in Wage Inequality: Some Problems and Puzzles,” Journal of Labor Economics 20(4):733–783. Chetty, Raj, Nathaniel Hendren, Patrick Kline, and Emmanuel Saez. 2014. “Where is the Land of Opportunity? The Geography of Intergenerational Mobility in the United States.” Quarterly Journal of Economics. Dahl, Gordon, and Lance Lochner. 2012. “The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit,” American Economic Review 102(5): 1927-1956. Gottschalk, Peter, and Robert Moffitt. 2009. “The Rising Instability of U.S. Earnings” Journal of Economic Perspectives, 23(4): 3–24. Hoynes, Hilary, Diane Schanzenbach, and Douglas Almond. 2014. “Long Run Impacts of Childhood Access to the Safety Net.” American Economic Review. Kniesner, Thomas J., and James P. Ziliak. 2002. “Tax Reform and Automatic Stabilization,” The American Economic Review 92(3): 590–612. Lee, Chul-In, and Gary Solon. 2006. “Trends in Intergenerational Income Mobility.” NBER Working Paper #12007. Lemieux, Thomas. 2006. “Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill?” American Economic Review 96(3): 461–498. Neal, Derek, and Amrin Rick. 2014. “The Prison Boom & Lack of Black Progress after Smith & Welch.” Department of Economics, University of Chicago. Neumark, David, and William Wascher. 2007. “Minimum Wages and Employment.” Foundations and Trends in Microeconomics, Vol 3, No 1-2, 1-182. Piketty, Thomas, and Emmanuel Saez. 2003. “Income Inequality in the United States, 1913-1998.” Quarterly Journal of Economics 118(1): 1-39. Solon, Gary. 2013. “Theoretical Models of Inequality Transmission across Multiple Generations.” Stanford Center on Poverty and Inequality. Appendix: Selected Additional Readings A. Static Model of Labor Supply Angrist, Joshua and William N. Evans, “Children and Their Parents’ Labor Supply: Evidence from Exogenous Variation in Family Size,” AER 88 (June 1998) 450-477. Berndt, Ernst R. (1990). The Practice of Econometrics: