Labor Economics Summer School

Five lectures explore both the demand for education and the supply of education. Most of the course deals with policy debates concerning the best ways to use public funds to supply K-12 education services. The course draws heavily on my 2018 book, Information, Incentives, and Education Policy.

Course Outline

1. Human Capital Models
The first lecture explores models of the demand for education. The development of learning skills and other capacities during childhood shapes adult decisions concerning education and occupational choice and therefore drives much of lifetime income inequality. Since children cannot finance efficient investment in these capacities on their own, governments may improve welfare by funding K-12 education. See Ben Porath (1967), Cuhna and Heckman (2007), Introduction of Neal (2018).

2. Empirical Impacts of Education
The second lecture explores the literature on the causal impact of education on life outcomes. At the end of the lecture, we briefly review the Spence signaling model and discuss evidence that separates human capital and signaling explanations for observed casual impacts of schooling on employment and earnings. Card (2000), Clark and Martorell (2013), Chetty et al (2010), Heckman, Lochner, and Todd (2008).

3. Education Production
The third lecture examines the empirical literature on the mapping between educational inputs and learning outputs as well as the literature on personnel policies and organizational practices in traditional public schools. A large literature confronts the empirical challenges that researchers face in this area. We review this literature and draw some tentative conclusions about the efficiency of resource allocation in public schools. Todd and Wolpin (2003), Chapter 1 of Neal (2018).

4. Assessment-Based Accountability
We review the literature on personnel and accountability policies that attach high-stakes to performance statistics derived from student assessment results. We review both the successes and failure of these policies, and then explore optimal design questions. Neal (2011), Chapter 2 of Neal (2018).

5. School Choice
We begin by discussing school assignment mechanisms that allow parents to express their preferences over a menu of public school options. We then review the literature on attempts to expand parental choice through charter schools and voucher systems. Choice policies and assessment-based accountability systems are complements and not substitutes. Both approaches are necessary to create integrated education policies that hold publicly funded educators responsible for all aspects of their performance while limiting the possibility that ill-informed or ill-motivated parents may choose schools that serve their children poorly. Epple et al (2015), Epple et al (2016), Pathak (2016), Chapters 3-5 Neal (2018).

Basic Reference

Information, Incentives, and Education Policy (included in the course fees)
Derek A. Neal
Harvard University Press, 2018
ISBN: 9780674050907

About the Instructor

Derek Neal is the William C. Norby Professor in the Kenneth C. Griffin Department of Economics and the Committee on Education at the University of Chicago. Much of Professor Neal’s recent research focuses on the design of incentive and accountability systems for educators. In 2018, he published Information, Incentives, and Education Policy (Harvard University Press). This book employs standard tools from information economics to examine a range of education reform agendas, from assessment-based accountability and centralized school assignments to charter schools and voucher systems. Professor Neal demonstrates where these programs have been successful, where they have failed, and why.

Earlier in his career, his research focused on the causes and consequences of measured skill gaps between blacks and whites in the United States. His current work explores how different aspects of criminal justice policy impact black-white inequality in the US.

He is a past President of the Midwest Economics Association, a Fellow of the Society of Labor Economists, and a former Editor of the Journal of Human Resources, the Journal of Labor Economics and the Journal of Political Economy.

Overview

In the world, more than 220 million individuals live in a country different from that of birth. In developed countries, foreign born individuals represent 10.5% of the population. This important factor reallocation is the result of decades of increasing globalization of labor markets. Why people migrate, who migrates where, and what are the economic impacts for the receiving economy, are important questions that have motivated a huge body of research in Economics.

The main objective of this course is to explore the different answers provided in the literature to these questions. We will start focusing on migration decisions. Understanding the motivations to migrate is important to analyze who migrates to each location. Hence, we will explore the theoretical grounds for this type of decision starting from the Roy model, and its seminal implementation in the migration context by Borjas (1987), and then we will review some empirical literature. From a very different angle, recent work in the last few years has estimated structural models of internal migration (Gould, 2007; Kennan and Walker, 2011; Buchinsky et al, 2014 among others). Internal migration decisions have specific idiosyncrasies that make worthy their analysis in a separate way. We will devote important emphasis on migration costs, available information, and the effect of internal migration in shaping local labor markets.

The second part of the course will focus on labor market impacts of immigration. First we will explore the literature that has analyzed the impact of immigration across local labor markets. Later, we will review the literature that studies labor market impacts of immigration at the national level. All these approaches are well detailed in Borjas (2014). Two important difficulties to overcome in both cases are endogeneity of immigrant inflows and adjustments by natives, previous immigrants, and/or prospective migrants. Finally, we will study the assimilation process of immigrants in the labor market.

Course Outline

Part I: Migration Decisions

1. International migration decisions
   1. Migration Decisions
   2. Immigration Selection: The Roy Model
   3. Empirical Evidence
2. Structural estimation of models of internal migration

Part II: Economic consequences of immigration

1. Wage effects of immigration
   1. Effects on local labor markets
   2. National level approaches
2. Assimilation of immigrants

About the Instructor

Joan Llull is Director of MOVE (Markets, Organizations and Votes in Economics), Associate Professor at Universitat Autònoma de Barcelona, and Affiliated Professor at the Barcelona School of Economics. He received his PhD in Economics from CEMFI in 2011, and he joined MOVE, Autònoma de Barcelona, and BSE afterwards. He is also an external fellow of the Center for Research and Analysis of Migration (CReAM) from the University College London, and a member of the INSIDE network.

Professor Llull's research focuses on analyzing the causes, consequences, and implications of international and internal migrations, as well as on the analysis of family formation, household structure, and health. His research uses different state-of-the-art econometric techniques, ranging from the estimation of rich equilibrium dynamic discrete choice structural models, to the proposition of novel identification strategies combining different samples is the estimation of parameters of interest from a reduced form of an economic model.

Overview

This course explores the determination of labor market outcomes, with a particular focus on the determination of the unemployment rate and the flow of workers between employment and unemployment.  Throughout the course we will use economic theory to motivate a careful analysis of relevant data sources.

Course Outline

1. Unemployment and labor market flows: decomposition of hours worked; measurement of the job finding and separation rates; and the gross flow of workers between employment, unemployment, and out of the labor force. 
2. Duration dependence in the job finding rate: gross flows at different frequencies, distinguishing between structural duration dependence and heterogeneity; and the role of unemployment benefits. 
3. Business Cycle Fluctuations: job vacancies and the matching function; the labor wedge. 
4. Basic search model: linear preferences and linear production technology.  Quantitative evaluation of the model’s performance.  The role of the “value of leisure.” 
5. Nonlinear search model: finite intertemporal elasticity of substitution in consumption; capital; search intensity; wage rigidities.

Basic Reference

Labor Markets and Business Cycles (included in the course fees)
Robert Shimer
Princeton University Press, 2010
eISBN: 978-1-4008-3523-2

About the Instructor

Robert Shimer is the Alvin H. Baum Professor in Economics at the University of Chicago.  Prior to joining the Chicago faculty in 2003, he received his Ph.D. at M.I.T. and taught at Princeton University.  He is a consultant at the Federal Reserve Banks of Atlanta, Chicago, and Minneapolis, a Research Associate in the National Bureau of Economic Research, a Fellow of the Econometric Society and the Society of Labor Economists, and a Member of the American Academy of Arts and Sciences.