COURSE SYLLABUS

LABOR ECONOMICS

Instructors: Prof. John Sutherland Earle Department of Economics Central European University Prof. Álmos Telegdy Department of Economics Central European University Spring term, 2015/2016 academic year Course level: MA # Credits (# ECTS Credits): 2(4) Pre-requisites: Economics MA: Core Microeconomics, Core Econometrics Economic Policy MA: Microeconomics for Economic Policy; Econometrics 2 or Research and Econometrics. Office hours (N11, Rm. 601) Earle: Mon 3-5, and by appointment ([email protected]) Telegdy: Wed 2-4, and by appointment ([email protected]) Course Description The field of Labor Economics applies microeconomic analysis to important social issues and public policies involving employment, wages, working conditions, and unemployment. A partial list of issues and policies would include poverty, welfare policy, minimum wages, overtime rules, layoff restrictions, education, job safety, entrepreneurship, wage subsidies gender and racial discrimination, immigration and internal migration, labor relations, unions and other institutions, division of labor within families, unemployment insurance, and income inequality. Learning Outcomes To understand the functioning of labor markets and labor market policies; to understand models that describe the labor market and policy effects; to understand empirical microeconomic research on issues related to labor markets. By the end of this course, students will be able to:

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 Understand the basic theories of labor markets  Understand and analyze labor market policy outcomes  Read scientific papers in the field of labor economics  Understand econometric indentification issues  Know the most important types of data  Understand regression output related to labor economics Course Requirements Course requirements include a final examination and an optional empirical project. The final exam will be held on the date set by the Department. The deliverables for the empirical project consist of a very short research prospectus and short final paper, with weights of 5 and 30 percent and due dates of May 22 and June 5, respectively. Students who choose to do the paper should announce the topic chosen and the dataset by May 15 (by email to both instructors). The exam counts for 100 percent of the course grade for students not selecting the project and 65 percent for those choosing the project. The purpose of the empirical project is to provide an opportunity for students to experience research using microdata, The analysis will involve application of a standard technique in labor economics, such as estimating the return to schooling, the gender gap in earnings, the pace of job reallocation, the determinants of worker mobility, etc. More information on the project will be provided early in the term. In addition to these requirements, discussion questions will be distributed towards the end of the course. The purpose of these question sets is to stimulate additional thinking about the course topics, but there is no requirement that the answers be turned in (nor will they be graded). The style of questions will be similar to those that will appear on the examination. COURSE SCHEDULE, READINGS No textbook is fully appropriate for the level and topics of this course, but in several topics we draw upon Derek Bosworth, Peter Dawkins, and Thorsten Stromback, The Economics of the Labour Market, Addison Wesley Longman, 1996 (referred to below as “BDS”). More importantly, we will be studying a number of articles from the professional literature, also listed below. The "required" readings are indicated with “*” while other, "optional" articles are included to encourage interested students to pursue particular interests. I. Methods of Analysis and Overview (1 lecture) *Köllő, János (2011), „Employment, Unemployment and Wages in the First Year of the Crisis.” In: The Hungarian Labor Market. Review and Analysis (Fazekas, Molnár eds.). Budapest: IE-HAS and National Employment Foundation.

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II. Supply of Labor Services (2.5 lectures) BDS, pp. 43-46, 54-60 *Baker, Michael, Jonathan Gruber, Kevin Milligan (2008), “Universal Child Care, Maternal Labor Supply, and Family Well-Being.” Journal of Political Economy 116(4), 709-745. *Blau, Francine, and Lawrence Kahn (2007), “Changes in the Labor Supply Behavior of Married Women: 1980-2000.” Journal of Labor Economics 25(3), 393-438. *Killingsworth, Mark (1983), Labor Supply, Cambridge: Cambridge University Press, pp. 1-28, 78-87. Lovász, Anna, Ágnes, Szabó-Morvai (2015), “Does Subsidized Childcare Matter for Maternal Labor Supply? A Credible Cutoff-Based Estimate at a Policy Relevant Point. Mimeo. III. Demand for Labor Services (3.5 lectures) *Hamermesh, Daniel (1993), Labor Demand. New Jersey: Princeton University Press, pp. 17-25, 44-52. *Burda, Michael C., and Jennifer Hunt (2010), “What Explains the German Labor Market Miracle in the Great Recession?” Brookings Papers in Economic Activity, Economic Studies Program, The Brookings Institution, 42(1), 273-335. *Dougherty, Sean, Verónica Frisancho Robles, and Kala Krishna (2014), “Employment Protection Legislation and Plant-Level Productivity in India.” India Policy Forum (Also published as NBER Working Paper No. 17693). *Harasztosi, Péter, Attila Lindner (2014), “Who Pays for the Minimum Wage?” Mimeo. IV. Human Capital (2 lectures) *BDS, 16.3.1-3 Kertesi, Gábor and János Köllő (2002), “Economic Transformation and the Revaluation of Human Capital – Hungary, 1986 – 1999,” Research in Labor Economics 20. Munich, Daniel, Jan Svejnar, and Katherine Terrell (2005), “Returns to Human Capital under the Communist Wage Grid and During the Transition to a Market Economy,” Review of Economics and Statistics 83(1), 100-123. *Nordin, Martin (2008), “Ability and Rates of Return to Schooling – Making Use of the Swedish Enlistment Battery Test.” Journal of Population Economics 21(3), 703-717. Andren, Daniela, John S. Earle and Dana Sapatoru (2005), “The Wage Effects of Schooling under Socialism and in Transition: Evidence from Romania, 1950-2000,” Journal of Comparative Economics 33(2), 300-323. Campos, Nauro, and Dean Jolliffe (2007), “Earnings, Schooling and Economic Reform: New Econometric Evidence from Hungary (1986-2004).” World Bank Economic Review 21(3), 509-526. Hazans, Mihails, Ija Trapeznikova, and Olga Rastrigina (2008), “Ethnic and Parental Effects on Schooling Outcomes before and during the Transition: Evidence from the Baltic Countries.” Journal of Population Economics 21(3), 719-749.

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V. Compensating Differentials (2 lectures) Ashenfelter, Orley (2006), “Measuring the Value of a Statistical Life: Problems and Prospects.” Economic Journal 116(510), C10-C23. Berger, Mark, Glenn C. Blomquist, and Klara Sabirianova Peter (2008), “Compensating Differentials in Emerging Labor and Housing Markets: Estimates of Quality of Life in Russian Cities.” Journal of Urban Economics 63(1), 25-55. *DeLeire, Thomas, and Helen Levy (2004), “Worker Sorting and the Risk of Death on the Job.” Journal of Labor Economics 22(4), 925-953. Felfe, Christina (2012), “The motherhood wage gap: What about job amenities?” Labour Economics, 19(1), 59-67. *Olson, Craig A. (2002), “Do Workers Accept Lower Wages in Exchange for Health Benefits?” Journal of Labor Economics 20(2, pt. 2), S91-S114. VI. Job Reallocation (2 lectures) *Davis, Steven J., and John Haltiwanger (1999), “Gross Job Flows.” In: Handbook of Labor Economics (Ashenfelter and Card eds.), Amsterdam: Elsevier, Sections 1-5. Brown, J. David, and John S. Earle (2002) , “Gross Job Flows in Russian Industry Before and After Reforms: Has Destruction Become More Creative?” Journal of Comparative Economics 30(1). Haltiwanger, John C., and Milan Vodopivec (2002), “Gross Worker and Job Flows in a Transition Economy: An Analysis of Estonia.” Labour Economics 9(5), 601-630. Haltiwanger, John C., and Milan Vodopivec (2003), “Worker Flows, Job Flows, and Firm Wage Policies: An Analysis of Slovenia,” Economics of Transition 11(2). *Haltiwanger, John H., Ronald Jarmin, and Javier Miranda (2013), “Who Creates Jobs? Small vs. Large vs. Young.” Review of Economics and Statistics 95(2), 347-361. Brown, J. David, and John S. Earle, “Do SBA Loans Create Jobs?” Working paper, 2013. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2205174 VII. Gender and Race on the Labor Market (2 lectures) *BDS, 24.2.1-2.2 *Brainerd, Elizabeth (2000), “Women in Transition: Changes in Gender Wage Differentials in Eastern Europe and the Former Soviet Union,” Industrial and Labor Relations Review 54(1), 138-62. *Fryer, Jr. Roland, and Glenn C. Loury (2005), “Affirmative Action and Its Mythology.” Journal of Economic Perspectives 19(3), 147-162. *Holzer, Harry J., Steven Raphael, and Michael Stoll (2006), “Perceived Criminality, Criminal Background Checks, and the Racial Hiring Practices of Employers.” Journal of Law and Economics 49, 451-480. *Kertesi Gábor, and Gábor Kézdi (2011), “The Roma/Non-Roma Test Score Gap in Hungary.” American Economic Review Papers and Proceedings, 101(3), 519-525.

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VIII. Labor and International Markets (2 lectures) *Hasan, Rana, Davishish Mitra, and K.V. Ramaswamy (2007) “Trade Reforms, Labor Regulations, and Labor-Demand Elasticities: Empirical Evidence from India, Review of Economics and Statistics 89(3), 466-481. Revenga, Ana L. (1992), “Exporting Jobs? The Impact of Import Competition on Employment and Wages in U.S. Manufacturing.” Quarterly Journal of Economics 107(1), 255-284. Huttunen, Kristiina (2007), “The Effect of Foreign Acquisition on Employment and Wages: Evidence from Finnish Establishments.” The Review of Economics and Statistics 89, 497-509. *Brown, J. David, John S. Earle, and Álmos Telegdy (2010), “Employment and Wage Effects of Privatisation: Evidence from Hungary, Romania, Russia, and Ukraine,” Economic Journal 120, 683-708. *Earle, John S., Álmos Telegdy, and Gabor Antal (2014), “FDI and Wages: Evidence from Firm-Level and Linked Panel Data for Hungary, 1986-2008.” http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2183305 Hijzen, Alexander, Pedro S. Martins, Thorsten Schank, and Richard Upward (2013), “Foreign-Owned Firms Around the World: A Comparative Analysis of Wages and Employment at the Micro-Level.” European Economic Review 60, 170-188.

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