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Introduction Fall2020

This document provides an overview of a labour economics course. It introduces key concepts in labour economics such as supply and demand of labour, wage determination, and government regulation of labour markets. It also outlines the structure of the course including lectures, problem sets, reading groups and the final exam.

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rtchuidjangnana
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5 views

Introduction Fall2020

This document provides an overview of a labour economics course. It introduces key concepts in labour economics such as supply and demand of labour, wage determination, and government regulation of labour markets. It also outlines the structure of the course including lectures, problem sets, reading groups and the final exam.

Uploaded by

rtchuidjangnana
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Labour Economics

(S210009)
Labour economics?
• The study of the labor market
• We (you as well!) allocate substantial time and
energy to the labor market
• Labor economics spans from the understanding of
how and why we decide to supply labor to firms
behaviors.
• Further, schooling as investment, migration, wage
determination, …
Basics of the Labor Market
• Workers maximize their welfare according to a
utility function as a relation between well being
and leisure/consumption U(c,l)
• Firms maximize profits, by deciding production
schedule, employment, quality of workers, etc.
• Government uses regulation to achieve goals of
public policy
• Minimum wages
• Occupational safety
• Employment protection
The theory of labour markets
• We will use theory to combine the behaviours
of workers, firms and governments and
understand outcomes:
• employment, unemployment, wages…
• Our theories will be based on two basic
principles:
• rational agents maximizing well-being (utility or
profits);
• interactions among agents lead to equilibrium.
Economic models as simplifications
• Economic models are generalisations or
simplifications of the world that help
identifying the main driving forces underlying a
given phenomenon.
• Abstract from the details and focus on the main
things.
• Useful to find general rules.
• Quite the opposite approach of case studies.
• Focus on one individual case and analyse all it
details.
• Generalisation comes from the detailed analysis of
many case.
Economics and the real world
• Of course we don’t think that people maximize
complex utility functions when they choose
which cereals to buy at the supermarket!

• Still, economic theory is a very powerful tool to


describe and understand the functioning of an
economic system.

• Many other disciplines adopt the same


approach: F1 racing or motorbiking
An example from Alaska…
• In the late-1960s, oil was discovered in northern
Alaska.
• very remote, frigid area, few consumers lived there…
• To get oil to consumers, an almost-800 mile pipeline
was proposed by oil companies
• construction began in spring 1974 and ended in 1977
• employed about 50,000 total workers during the summers of
1974-1977
• once built, the number of workers was reduced to a small
maintenance crew
The Alaskan Labor Market: Theory
Earnings ($)
S0

w1

w0 D1

D0

Employment
E0 E1
Alaska: predictions from theory
• Before the pipeline, workers in the Alaskan labor market earned
w0 and E0 workers were employed.
• The construction of the Trans-Alaska pipeline should trigger an
increase in the demand for workers, leading to a higher wage (w1)
and more workers being employed (E1).
• That is, the simple model predicts that wages and employment
should both rise in response to the construction of the new
pipeline.
• But, as soon as the project is completed, we should observe a fall
in the wage rate from w1 back to w0 and a fall in employment
from E1 back to E0.
• Thus, the wage and employment gains should be temporary.
Wages and Employment in the
Alaskan Labor Market, 1968-1983
Employment Monthly Salary ($)
250,000 4,500

230,000
4,000
210,000

190,000
3,500
170,000

150,000 3,000

130,000
2,500
110,000
Wage
90,000
2,000
70,000 Employment

50,000 1,500
1968 1970 1972 1974 1976 1978 1980 1982 1984
This course
 A course in two parts
 The fundamentals: supply, demand and equilibrium.
 Topics: education, migration, inequality,
discrimination.
 Pre-requisites
 foundations of microeconomics (utility/profit
maximization)
 foundations of econometrics (OLS, endogeneity)
Logistics
 Main instructor: Costanza Naguib
 Office hour: skype by appointment
([email protected])

 Teaching assistant: Clemente Pignatti


 reading groups and problem sets + assistance
 Office hour by appointment ([email protected])
The lectures
 The rule is all and only the material covered in
class is exam material

 Syllabus is relatively standard, good reference is:


 Ehrenberg & Smith, Modern Labor Economics: Theory and
Public Policy, 12E.
 For topics we will also use:
Boeri&van Ours, The Economics of Imperfect Labour
Markets, 2nd Edition.
Problem sets
 3 sets of problems
 done individually
 posted online one week before submission deadline
 Solutions will be made available afterwards
 Self-grading
 after the presentation of the solutions, you revise your
work and send a proposition for a grade to the TA
 we perform random checks and punish in case of over
generosity or inaccuracy
Reading groups
 Done in groups of 3-4 students who can select
one paper to present among those in the list
provided
 Each group should record a presentation of the
paper chosen and upload it. The presentation
will be graded by the instructor and the TA.
 All readings are required material for the
exam!
Grading policy
 Final exam 50%, problem sets 25%, paper presentations 25%
 each graded on the usual 1-6 scale
 Problem sets and presentations only count if (on average) they
improve your grade in the final exam. Otherwise they are
disregarded.
 Problem sets and presentation are valid only if all problem sets
are handed-in and the presentation is given.
 For the presentation, all members of the group get the same
grade based on the quality of the presentation and your
understanding of the paper.
Final exam

 To be defined on the basis of the Covid-19 situation.

 Further information will follow


Readings
Textbook: Ehrenberg R. and Smith. R. Modern Labor
Economics, Prentice Hall, 12th Edition. 2014.
 quite expensive but available electronically (cheaper) and
available at the library
Papers
 Required readings are those assigned to the reading
groups (all, not only yours!)
 Additional (but non required) readings may be indicated
during the course
Websites and communication
 All material is on Moodle
 PPT presentations
 Problem sets and solutions
 Reading lists
 Any other additional material

 Moodle also for communication

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