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Economics 7763: Labor Economics I

Department of Economics, Northeastern University


Spring 2011 (version 2.0)

Prof. Osborne Jackson


Office: 314 Lake Hall
Phone: (617) 373-4237
Email: o.jackson@neu.edu
Course Website: http://blackboard.neu.edu/
Office Hours: Tue and Fri 3:45-5:15 PM (other times by appointment)

Course Meetings
Tue and Fri 2:00-3:30 PM, 316 Lake Hall

Course Description
The goal of this course is to prepare students to conduct original research in the field of
labor economics. You will be exposed to the theoretical and methodological foundations
of neoclassical labor market analysis. Through the subset of topics we will discuss, you
will learn to be more discerning consumers of research and recognize what makes a good
paper. Thus, the skills you learn should prepare you for work across numerous subfields
beyond those we will cover.

Prerequisites
To enroll in this course, you must have completed the graduate sequences in
econometrics (Econ 5140 and Econ 7740) and micro theory (Econ 5110 and Econ 7710).

Course Materials
There is no required textbook for the course. However, a supplemental text (available at
the university bookstore or online) that you may find helpful to your understanding of the
material we will cover in lecture is:

Cahuc, Pierre and André Zylberberg. 2004. Labor Economics. Cambridge, MA: MIT
Press.

Other labor economics texts that you may find useful for this course or beyond are Gary
Becker’s classic book Human Capital, Dan Hamermesh’s Labor Demand, and Ron
Ehrenberg and Robert Smith’s undergraduate textbook, Modern Labor Economics.
However, these texts are neither required nor have they been ordered for availability at
the campus bookstore. In addition, the Handbook of Labor Economics, Vol. 1/2 ed. Orley
Ashenfelter and Richard Layard, 1986, and the Handbook of Labor Economics, Vol. 3 ed.
Orley Ashenfelter and David Card, 1999, are also valuable references.

As the prerequisites indicate, I will also expect familiarity with microeconomic and
econometric theory and application. If you do not already, I strongly recommend that
you own or have ready access to some graduate-level texts in both areas. Regarding
econometrics, at the introductory level, some good references are Greene’s Econometric
Analysis, Johnston and DiNardo’s Econometric Methods. Focusing on
microeconometrics, helpful texts include Cameron and Trivedi’s Microeconometrics:
Methods and Applications, Wooldridge’s Econometric Analysis of Cross Section and
Panel Data, and Angrist and Pischke’s Mostly Harmless Econometrics. At the
undergraduate level, Woolridge’s Introductory Econometrics: A Modern Approach may
prove useful. Regarding micro theory, at the graduate level, Mas-Colell, Whinston and
Green’s Microeconomic Theory and Varian’s Microeconomic Analysis are well-written
standards. At the undergraduate level, good resources include Nicholson’s
Microeconomic Theory: Basic Principles and Extensions and Varian’s Intermediate
Microeconomics: A Modern Approach.

The assigned and recommended readings for the course will draw from journal articles,
available on the web (e.g., JSTOR) and which you can access for free via the university
library’s EJournals (http://www.lib.neu.edu/online_research/ejournals/). I will copy, post
or link to (on the Blackboard site for the course) any important papers that are not easily
available. Papers from the Handbook of Labor Economics should be available at
http://www.sciencedirect.com.

In all cases, you will be expected to complete the assigned readings prior to class and be
prepared to participate in discussions of the methods, contributions and limitations of the
research. Further details are provided in the reading list.

Requirements and Grading


Your grade in the course will depend on your performance on a number of assignments,
as listed below:

Assignment Weight Due Date


Term Paper Proposal 5% Fri 2/4
Problem Sets (2 total) 20% TBD (tentatively Tue 2/15 and Tue 3/29)
Referee Report 10% Fri 3/18
Midterm Exam 15% Fri 2/25 (in class)
Term Paper 20% Tue 4/12
Class Presentation 5% Tue 4/19 and Fri 4/22 (in class)
Final Exam 25% Tue 4/26 or Fri 4/29 (TBD; 2 hours)

Problem Sets: There will be two problem sets, each due a few weeks before an exam,
corresponding to a subset of the topics being covered at that time. The problem sets will
allow you to gain direct experience with the theory and econometrics we will study. You
are welcome and encouraged to work on these questions together in groups, but note that
every individual is responsible for turning in a copy of his/her own problem set. Problem
sets will be graded on a 3-point scale, with missing assignments given a grade of zero.

Referee Report: This will be an evaluation of a working paper related to one or more of
the topics in the course. The report will give you additional exposure to critical reading

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of scholarly work, so that you may become more experienced in the assessment of
research.

Term Paper and Proposal: You will be required to write a term paper for this course.
The paper should be on a topic in labor economics, though not necessarily one of the
topics we cover this term (e.g., search theory). However, topics need to be approved by
me in all cases. If the term paper is a revision of a previous paper and/or being
written jointly with another course, there must be a clear additional contribution!

The term paper proposal will be a brief, 1-2 page summary of your research idea,
including your hypothesis, the gap in the literature it fills, and your plan to carry it out
(e.g., theory, and/or data and empirical strategy, etc.). You will be graded on whether the
proposal is complete and clear enough for me to evaluate and give feedback. I will then
arrange to meet with you during office hours to discuss your proposal and necessary
changes, if any, before granting topic approval.

As for the term paper itself, I am looking for a paper that presents your own empirical
research, or your own theoretical work, or a combination of the two. Thus, your paper
should be more than just a literature review or a longer version of the research proposal.
On the other hand, I am not expecting a dissertation chapter, although I hope that some of
the papers will grow into dissertation chapters. While length per se is not a
preoccupation, a rough guideline would be 15-25 double-spaced pages, not counting
references, tables, or diagrams.

Class Presentation: This will be a 40-minute, in-class presentation of your completed


term paper, to be scheduled during the final week of classes. Verbal communication of
your work is an important skill for economists in the academic, public, or private spheres
to possess, as is the ability to give useful feedback during such a presentation. Consider
this an opportunity to begin honing those skills. You will be assessed on the clarity,
organization, and content of your own presentation, as well as on your participation (i.e.,
questions and comments) during the presentations of your classmates. An LCD projector
presentation (e.g., MS PowerPoint, Beamer) will be expected (in-class laptop will be
provided). If this will be problematic for any reason, please discuss it with me
beforehand.

Exams: These will cover all of the topics learned in the course up to the point of the
exam, although the final exam will draw predominantly from post-midterm material.
Exams will focus on questions related to the theory, techniques, and papers we have
discussed. The midterm exam will be held in class from 2:00-3:30PM on Friday,
February 25. The final exam date and time is still to be determined and will be
announced as soon as university scheduling allows. However, note that it will be a two-
hour exam held on either Tuesday, April 26 or Friday, April 29, very likely in our usual
classroom (316 Lake Hall) and beginning at our usual class start time (2:00PM).

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Cumulative Grades: Final letter grades will be determined based on your cumulative
performance relative to the scores a good student at this level could reasonably be
expected to attain.

Late Assignments/ Missed Examinations Policy: Problem sets will be due by the start
of class on their announced due dates. Generally, you will have approximately one week
to complete a given problem set. Following a 10-minute grace period at the start of class,
I will deduct 1 point from each assignment for each day it is late. Assignments submitted
more than 48 hours after the due date will receive no credit.

If you miss the midterm or the final exam you will receive no credit unless you provide
documentation of a medical or family emergency. In the case of a legitimate emergency,
the missed quiz or exam will be given no weight in the calculation of the final grade and
other assignments will be reweighted accordingly. There will be no make-up exams. If
you foresee any conflict that will prevent you from taking an exam, please let me know
as soon as possible.

University Policies (e.g., Students with Disabilities, Academic Conduct)


Please be aware that all students in the course are responsible for knowing and
understanding the academic policies and procedures of the university to which they are
expected to adhere. These regulations are outlined in the Graduate Student Handbook,
which can be found here: http://www.northeastern.edu/gradhandbook/handbook.pdf.

Department Seminars and Labor Lunch: The Department Seminar occurs on various
Mondays, Wednesdays, and Thursdays throughout the semester, as announced, from
12:00pm to 1:15pm. Approximately half of the seminars are explicitly labor-related,
though they are all of an applied microeconomics nature. Additionally, the informal
Labor Lunch meets most Mondays from 12:00pm to 1:00pm, where students discuss and
sometimes present their ongoing research progress and issues. Both are held in the
conference room, 316 Lake Hall. Attending both of these seminars is strongly
encouraged. Seeing others’ work presented in preliminary form, along with hearing and
contributing to discussions about such work, are very helpful steps in starting to do your
own research. That, and not passing courses like Econ 7763, is the real goal of a Ph.D.!

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Tentative Course Schedule

1/11 Course Introduction


1/14 Labor Supply: Static Theory

1/18 Labor Supply: Static Theory


1/21 Labor Supply: Static Theory

1/25 Labor Supply: Intertemporal Models


1/28 Labor Supply: Intertemporal Models

2/1 Labor Supply: Social Programs


2/4 Labor Demand: Static Theory

2/8 Labor Demand: Static Theory


2/11 Labor Demand: Static Theory

2/15 Labor Demand: Immigration and the U.S. Labor Market


2/18 Labor Demand: Immigration and the U.S. Labor Market, Minimum Wages

2/22 Labor Demand: Minimum Wages


2/25 MIDTERM (In Class)

3/1 NO CLASS (Spring Recess)


3/4 NO CLASS (Spring Recess)

3/8 Market Equilibrium: Perfect Competition, Wage Trends


3/11 Market Equilibrium: Wage Trends

3/15 Market Equilibrium: Compensating Wage Differentials


3/18 Market Equilibrium: Compensating Wage Differentials

3/22 Market Equilibrium: Discrimination


3/25 Market Equilibrium: Discrimination

3/29 Human Capital: Education


4/1 NO CLASS (Jackson in D.C. for Conference; Make-up Class TBD)
TBD Human Capital: Education

4/5 Human Capital: Education, Training


4/8 Human Capital: Training

4/12 Human Capital: Roy Model


4/15 Human Capital: Roy Model

4/19 Class Presentations


4/22 Class Presentations

FINAL EXAM TBD (either Tue 4/26 or Fri 4/29; 2 hours in length)

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