Two - Year Master Degree in Economics

LABOR ECONOMICS II

Labor Economics II

Academic year 2014/2015

Sommario del corso

• Course objectives
• Results of learning outcomes
• Learning assessment methods
• Support activities
• Program
• Suggested textbooks and readings
• Teaching tools

Course objectives

Labor Economics II introduces students to the most advanced theories and empirical methods in contemporary Labor Economics. Students are expected to have good knowledge of the intermediates quantitative and econometric methods in economics. The course is in two parts. The first part (by Pietro Garibaldi) covers the microeconomic theories of labor economics. The second part (by Francesco Devicienti) covers the basics for doing empirical work in labor economics, from the identification strategies of causal relationships to the practical issues of data collection, manipulation and econometric analyses using standard statistical software.

Results of learning outcomes

1) Knowledge and understanding ability.

The objective of the course is to develop graduate students' abilities in acquiring a better understanding of the functioning of labour markets on the basis of the recent literature of the profession.

2) Capability to apply knowledge and understanding

The literature in the profession is usually formulated in terms of formal mathematical models. The lectures aim at helping the student to use and understand the intuition of these formal models as tools for the analysis of the labour market. Moreover, they endeavour to foster the students' understanding of the methodological issues involved when going from the theoretical analysis to the empirical testing of hypotheses formulated by theory.

3) Capability to approach the subject in a critical manner

By the end of the course, students will be expected to appreciate why the labour market does not function as a standard purely competitive market: actual labour markets are far more complex than this convenient reference model. The course will highlight the main channels through which the relationship between wages, employment and unemployment is affected, such as employees bargaining power, risk aversion, imperfect information, monopsony power and "social norms".

4) Communication abilities

Students will be required to communicate sophisticated theories in both formal/mathematical and intuitive/verbal formats.

5) Learning ability

Use of models and graphs to explain current labor market issues and problems. Ability to collect and process economic data using standard statistical techinques and software to (1) test the empirical validity of theories, (2) make economic predictions and provide policy recomendations.

Learning assessment methods

Examination

3 hours Written exam at the end of the course. 
Students are also expected to submit a short empirical report summarizing the results of their empirical analysis conducted under the supervision of the instructor.

Support activities

Further information

Further information will be provided during the course.

Program

Syllabus and Reading Material

PART I

The material for the first part is part of the forthcoming book by Daron Acemoglu and David Autor

Acemoglu, Daron and Autor, David “Lectures in Labor Economics”, forthcoming MIT Press (Hereafdter AA) available on line http://econ-www.mit.edu/faculty/acemoglu/courses. 
This textbook is fairly advanced. In class we will work with simple example. For the human capital part a very good reference is

S. Polachek, Earning over the lifecycle, IZA Discussion Paper 3181, November 2007

A couple of lectures will be based on the Book by Pietro Garibaldi, “Personnel Economics in Imperfect Labor Market”, Oxford University Press: Oxford 2006.

The search and matching course will be using handouts, but the Pissarides book is the key reference Pissarides, C. “Equilibrium Unemployment Theory”, MIT Press, 2000.

In case you have problems in finding the material please ask Pietro Garibaldi

PART I

The material for the first part is part of the forthcoming book by Daron Acemoglu and David Autor

Acemoglu, Daron and Autor, David “Lectures in Labor Economics”, forthcoming MIT Press (Hereafdter AA) available on line http://econ-www.mit.edu/faculty/acemoglu/courses

A couple of lectures will be based on the Book by Pietro Garibaldi, “Personnel Economics in Imperfect Labor Market”, Oxford University Press: Oxford 2006

Search and Matching Notes, by Pietro Garibaldi

In case you have problems in downloading the notes please ask Pietro Garibaldi

Lectures 1, 2 
The Basic Theory of Human Capital 
AA Chapter 1, Polacheck

Lectures 3 
Human Capital and Signaling 
AA Chapter 2, Garibaldi-Chapter 5.

Lectures 4, 5 
Incentives and Agency 
Garibaldi, Pietro Personnel Economics in Imperfect Labor Markets, Chapter 6, and 7

Lectures 6, 7 
Training and Human Capital Investments 
Garibaldi, Chapter 9, 10

Lectures 8 
Temporary Contracts 
Garibaldi, Chapter 4

Lectures 9,10 and 11 
Search Matching.

PG Notes

PART II

Description: This part of the course will present modern methods for conducting empirical research in labor economics. The focus will be on the identification strategies for causal relationships of interest to economists and other social scientists. There will be a couple of lessons presenting data collection strategies and illustrating how to handle real individual-level (firm and worker) microdata, plus a couple of laboratory, hands-on lessons teaching the students how to use standard statistical software (STATA) to perform a convincing empirical analysis. This part of the course is particularly suitable to those students intending to carry out some empirical analyses as part of their final dissertation. The effect of unions and collective bargaining on various firm outcomes will serve as an example and will be covered in some detail, but other empirical labor issues will be considered as well.

Programme:

1. Empirical Strategies in Labor Economics (lectures 1, 2 and 3) 
- Introduction and Motivation. 
- Identification strategies for causal relationships

References:

J. Angrist and A. Krueger (1999) “Empirical Strategies in Labor Economics”, in Handbook of Labor Economics, vol. 3, chap. 23, edited by O. Ashenfelter and D. Card. 

J. Angrist and J. Pischke (2009) “Mostly Harmless Econometrics”, Princeton University Press.

2. Unions and Collective Bargaining (lectures 4 and 5) 
- Introduction and Motivation. 
- Bargaining Theory 
- Standard models of collective bargaining 
- Empirical evidence regarding the consequences of collective bargaining

References: 
Cahuc and Zylberberg, Labor Economics, Chapter 7. 
G. Borjas “Labor Economics”, ch. 10, MacGraw Hill, 6th edition.

3. Data collection strategies and measurement issues (lecture 6 and 7) 
- Types of microdata (survey data, administrative data, ...) 
- Example I: Analysis of one (real) firm-level dataset 
- Example II: Analysis of one (real) worker-level dataset

4. Laboratory session: How to conduct empirical research using STATA (lecture 8, 9, and 10) 
- Laboratory session: Introduction to STATA 
- Laboratory session: Examples using real datasets

References: 
STATA Manuals. 
Notes from the instructor.

5. Presenting the results of the empirical analysis and writing-up a research report (lecture 11) 
- Laboratory session: The effect of unions on firm investment: the hold-up problem.

References: 
Addison et. Al. (2007) “Do Works Councils Inhibit Investments?”, Industrial and Labor Relation Review, 60,2.

Class schedule

• Teaching materials
• Exams and finals
• Go to Moodle
• Visit the forums