Labor Economics Summer School

Course Overview

This course explores the determination of wages. It explores how and why wages evolve over the life-cycle of workers and also why wages vary among different types of workers who are in their prime working years. We begin by comparing models that describe how the process of finding good job matches influences life-cycle wage growth to models that attribute life-cycle wage growth to human capital accumulation. We then consider how public policy impacts the extent to which successful adults are able to impact the relative labor market success of their children by investing in their human capital, and we explore how race and gender impact labor market outcomes in different developed countries. We then examine the impacts of technology, firm characteristics, industry structure, and related factors on the distribution of wages. Finally, we examine how, within firms, employers may employ incentive systems that create ex post wage dispersion that exceeds the ex ante variation in worker skill.

Course Outline

Day 1 - Learning, Sorting, and Matching as sources of wage growth and growing dispersion in wages as workers age.

Day 2 - Human Capital growth as a source of life-cycle wage growth and the labor market returns to education.

Day 3 - How race, gender, and family background impact labor market inequality and its transmission.

Day 4 - Why do wages differ among firms and sectors within samples of observationally similar workers? The roles of worker sorting, frictions, monopsony, and technology.

Day 5 - How firms create wage dispersion to solve problems that arise from hidden actions and unknown types. Agency theory applied to personnel problems.

References

Day 1 - Learning, Sorting, and Matching as sources of wage growth and growing dispersion in wages as workers age. 

Jovanovic, Boyan. "Job matching and the theory of turnover." Journal of political economy 87.5, Part 1 (1979): 972-990. 

Gibbons, Robert, and Michael Waldman. "A theory of wage and promotion dynamics inside firms." The Quarterly Journal of Economics 114.4 (1999): 1321-1358. 

Pavan, Ronni. "Career choice and wage growth." Journal of Labor Economics 29.3 (2011): 549-587. 

Barlevy, Gadi, and Derek Neal. "Allocating effort and talent in professional labor markets." Journal of Labor Economics 37.1 (2019): 187-246. 

Day 2 - Human Capital growth as a source of life-cycle wage growth and the labor market returns to education. 

Ben-Porath, Yoram. "The production of human capital and the life cycle of earnings." Journal of political economy 75.4, Part 1 (1967): 352-365. 

Card, David. "The causal effect of education on earnings." Handbook of labor economics 3 (1999): 1801-1863. 

Bhuller, Manudeep, Magne Mogstad, and Kjell G. Salvanes. "Life-cycle earnings, education premiums, and internal rates of return." Journal of Labor Economics 35.4 (2017): 993-1030. 

Chetty, Raj, et al. "Race and economic opportunity in the United States: An intergenerational perspective." The Quarterly Journal of Economics 135.2 (2020): 711-783. 

Day 3 - How race, gender, and family background impact labor market inequality and its transmission. 

Blundell, Richard, et al. "Changes in the distribution of male and female wages accounting for employment composition using bounds." Econometrica 75.2 (2007): 323-363. 

Olivetti, Claudia, and Barbara Petrongolo. "Unequal pay or unequal employment? A cross-country analysis of gender gaps." Journal of Labor Economics 26.4 (2008): 621-654. 

Blau, Francine D., and Lawrence M. Kahn. "The gender wage gap: Extent, trends, and explanations." Journal of economic literature 55.3 (2017): 789-865. 

Bayer, Patrick, and Kerwin Kofi Charles. "Divergent paths: A new perspective on earnings differences between black and white men since 1940." The Quarterly Journal of Economics 133.3 (2018): 1459-1501. 

Day 4 - Why do wages differ among firms and sectors within samples of observationally similar workers? The roles of worker sorting, frictions, monopsony, and technology. 

Acemoglu, Daron, and David Autor. "Skills, tasks and technologies: Implications for employment and earnings." Handbook of labor economics. Vol. 4. Elsevier, 2011. 1043-1171. 

Card, David, Jörg Heining, and Patrick Kline. "Workplace heterogeneity and the rise of West German wage inequality." The Quarterly journal of economics 128.3 (2013): 967-1015. 

Lamadon, Thibaut, Magne Mogstad, and Bradley Setzler. "Imperfect competition, compensating differentials, and rent sharing in the US labor market." American Economic Review 112.1 (2022): 169-212. 

Bonhomme, Stéphane, et al. "How Much Should We Trust Estimates of Firm Effects and Worker Sorting?." forthcoming Journal of Labor Economics (2020). 

Day 5 - How firms create wage dispersion to solve problems that arise from hidden actions and unknown types. Agency theory applied to personnel problems.  

Rosen, Sherwin. “Prizes and Incentives in Elimination Tournaments.”  American Economic Review (1986)

Prendergast, Canice. "The provision of incentives in firms." Journal of economic literature 37.1 (1999): 7-63. 

Lemieux, Thomas, W. Bentley MacLeod, and Daniel Parent. "Performance pay and wage inequality." The Quarterly Journal of Economics 124.1 (2009): 1-49. 

Barlevy, Gadi, and Derek Neal. "Allocating effort and talent in professional labor markets." Journal of Labor Economics 37.1 (2019): 187-246.

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.

Course Overview

This course uses economic analysis to explore gender differences in economic outcomes, in both the labor market and the household. Men earn on average higher wages than women. Men and women concentrate in different occupations, and women are under-represented in the political sphere and high-powered occupations. Women attain on average higher levels of schooling than men, and they take on a higher share of household chores and childcare. 

Why these differences? Do they represent a problem? Should families, schools, firms, or governments do something about it? This course will provide you with an overview of a recent literature in economics that documents gender gaps in a range of domains, try to uncover the factors that drive them, and evaluates the effectiveness of different policies in mitigating them. Some of the main topics that we will cover include: gender gaps in wages and employment, gender and education, gender differences in psychological traits, the role of the family (fertility, marriage and divorce, household specialization), and gender and public policy.

Course Outline

Lecture 1. Introduction: Gender and economics. Gender gaps in the labor market

Lecture 2. Gender, economics, and covid-19

Lecture 3. Traditional explanations (i): Human capital

Lecture 4. Traditional explanations (ii): Discrimination

Lecture 5. Differences in non-cognitive skills and psychological traits

Lecture 6. Gender around the world

Lecture 7. The family and household specialization

Lecture 8. Fertility

Lecture 9. Social Norms and stereotypes

Lecture 10. The role of policy

References

There is an undergraduate-level textbook that covers most of the topics that we will discuss:

Blau, Francine D. and Anne E. Winkler. The Economics of Women, Men, and Work, 8th Edition. Oxford: Oxford University Press, 2018. 

I also recommend the following (general-interest) books:

Claudia Goldin (2021) Career and Family: Women’s Century-Long Journey toward Equity.

Myra Strober (2017) Sharing the Work: What My Family and Career Taught Me about Breaking Through (and Holding the Door Open for Others).

Iris Bohnet (2016) What Works: Gender Equality By Design.

Linda Babcock and Sara Laschever (2003) Women Don’t Ask: Negotiation and the Gender Divide.

There is also a reading list of research papers under each topic.

About the Instructor

Libertad González is a professor of Economics at Universitat Pompeu Fabra and Affiliated Professor of the BSE. She holds a PhD in Economics from Northwestern University and has been a visiting scholar at Columbia University and Boston University.

Her research lies in the areas of Labor, Public, and Health Economics. She has worked on topics that include the economic effects of immigration, and the effects of public policy on fertility, female labor supply, and child health.

She has published in journals such as the Journal of the European Economic Association, American Economic Journal: Economic Policy, the Journal of Human Resources, the European Economic Review, the Journal of Applied Econometrics, Labor Economics, etc.

Course 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

References

Main reference:

Borjas, George J., Immigration Economics, Cambridge: Harvard University Press, 2014.

Other surveys and general references:

Abramitzky, Ran and Leah Platt Boustan, “Immigration in American Economic History,” Journal of Economic Literature, 2017, 55 (4), 1311–1345.

Beine, Michel, Simone Bertoli, and Jeśus Ferńandez-Huertas Moraga, “A Practitioners’ Guide to Gravity Models of International Migration,” The World Economy, 2015, Published Online, 1–15.

Borjas, George J., “Immigration and Globalization: A Review Essay,” Journal of Economic Literature, 53(4), 961-974.

Borjas, George J., “The Economic Analysis of Immigration,” in Orley C. Ashenfelter and David E. Card, eds., Handbook of Labor Economics, Vol. 3A, Amsterdam: North-Holland Publishing Company, 1999, chapter 28, pp. 1697–1760.

Card, David E., “Is the New Immigration Really So Bad?,” Economic Journal, 2005, 115 (507), F300–F323.

Card, David E., “Immigration and Inequality,” American Economic Review: Papers and Proceedings, 2009, 99 (2), 1–21.

Docquier, Frederic and Hilel Rapoport, “Globalization, Brain Drain, and Development,” Journal of Economic Literature, 2012, 50 (3), 681–730.

Dustmann, Christian and Albrecht Glitz, “Migration and Education,” in Eric Hanushek, Stephen Machin, and Ludger Woessmann, eds., Handbook of the Economics of Education, Vol. 4, Amsterdam: North-Holland Publishing Company, 2011, chapter 4, pp. 327–479.

Dustmann, Christian and Joseph-Simon Görlach, “The Economics of Temporary Migrations,” Journal of Economic Literature, 2016, 54 (1), 98–136.

Dustmann, Christian and Uta Schönberg, and Jan Stuhler, “The Impact of Immigration on Local Labor Markets: Evidence from the Opening of the Czech-German Border,” Quarterly Journal of Economics, 2017, 132 (1), 435–483.

Friedberg, Rachel M. and Jennifer Hunt, “The Impact of Immigrants on Host Country Wages, Employment and Growth,” Journal of Economic Perspectives, 1995, 9 (2), 23–44.

Greenwood, Michael J., “Internal Migration in Developed Countries,” in Mark R. Rosenzweig and Oded Stark, eds., Handbook of Population and Family Economics, Vol. 1B, Amsterdam: North-Holland Publishing Company, 1997, chapter 12, pp. 647–720.

Hanson, Gordon H., “Illegal Migration from Mexico to the United States,” Journal of Economic Literature, 2006, 44 (4), 869–924.

Hanson, Gordon H., “The Economic Consequences of the International Migration of Labor,” Annual Review of Economics, 2009, 1 (1), 179–207.

Kerr, Sari Pekkala and William R. Kerr, “Economic Impacts of Immigration: A Survey,” Finnish Economic Papers, 2011, 24 (1), 1–32.

Molloy, Raven, Christopher L. Smith, and Abigail Wozniak, “Internal Migration in the United States,” Journal of Economic Perspectives, 2011, 25 (3), 173–196.

Moretti, Enrico, “Local Labor Markets,” in Orley C. Ashenfelter and David E. Card, eds., Handbook of Labor Economics, Vol. 4B, Amsterdam: North-Holland Publishing Company, 2011, chapter 14, pp. 1237–1313.

Moretti, Enrico, The New Geography of Jobs, New York: Houghton Mifflin Hartcourt, 2012.

Peri, Giovanni, “Immigrants, Productivity, and Labor Markets,” Journal of Economic Perspectives, 2016, 30 (4), 3–30.

There is also a reading list of research papers under each topic.

About the Instructor

Joan Llull is Research Professor at the Institute for Economic Analysis (IAE-CSIC) and Associate Research Professor of the Barcelona School of Economics (BSE). He is also an External Fellow at CReAM (UCL). He received his PhD from CEMFI in 2011.

Prior to joining CSIC, he worked at Universitat Autònoma de Barcelona (UAB) and MOVE.

Professor Llull's research focuses on labor economics, and more specifically on immigration, internal migration, occupational mobility, inequality, human capital, family economics, and health. His main research typically estimates dynamic discrete choice models of equilibrium, but several of his papers also use more reduced form approaches.

His work has been published in the Review of Economic Studies, Journal of Human Resources, and the European Economic Review, among others. His research has been funded by prestigious grants, including a Starting Grant from the European Research Council (ERC).

Llull is the Data Editor of the Econometric Society (for its journals Econometrica, Quantitative Economics, and Theoretical Economics) and editorial board member of the Review of Economic Studies. He has also served as Data Editor at the Economic Journal and the Econometrics Journal, associate editor of SERIEs --- The Journal of the Spanish Economic Association, and guest editor for Labour Economics, the Journal of the European Association of Labour Economists.