Terra McKinnish Econ 10 (303 )492-6770 terra.mckinnish@colorado.edu

Economics 8686· Labor Economics

This is a graduate survey course in labor economics. We will be covering classic topics in labor supply, human capital, and economics of the family. Attached is the reading list that we will be covering this semester. I encourage students to download reading lists for similar labor courses taught at other universities, because they act as excellent lists of references on various labor topics. In particular I strongly recommend obtaining the syllabus of:

I) V. Joseph Hotz, UCLA, http://www.econ.ucla.edu/hotz/e261a/ 2) Robert Moffitt, Johns Hopkins,

http://www.econ.jhu.edu/People/Moffitt/MoffittTeach.html

Both of the above instructors have compiled extensive reading lists.

The first 3-4 weeks of this class will be conducted as lectures in which I will cover the basic topics of static labor supply theory and estimation. After that, the course will be conducted increasingly in a seminar format in I will be introducing general issues in each topic and students will be presenting applied papers from the course syllabus. Students should plan on presenting 3-4 papers during the course of the semester, selected from the papers on the reading list marked with a ( + ).

There will also be occasional homework assignments, containing problem sets and/or data exercises to give students additional hands-on experience with the material being covered.

The requirements of this course are: a) Midterm and Final (25% and 35%) b) approx. 4 homeworks (20%) c) 3-4 paper presentations (20%)

Reading List

I. Labor Supply

A. Static Model

Deaton, A And J. Muellbauer. Economics and Consumer Behavior. p.86-105 and p.273-87

Killingsworth, M. Labor Supply. 1983. Chapters 1 and 2.

Pencavel, J. "Labor Supply of Men: A Survey." Handbook of Labor Economics. Vol. I, 1986.

Killingsworth and Heckman. "Labor Supply of Women" Handbook of Labor Economics, Vol. I, 1986.

B. Estimation of the Static Model

Killingsworth, M. Labor Supply. 1983. Chapters 3·and 4 .

Maddala. Limited Dependent and Qualitative Variables in Econometrics. 1983. Various Chapters. · ·

Blundell and Macurdy, "Labor Supply: A Review of Alternative Approaches" Handbook of Labor Economics, Vol. III

Heckman, J. "Shadow Prices, Market Wages and Labor Supply." Econometrica. 1974.

Heckman, J. "Sample Selection Bias as a Specification Error." Econometrica. 1979.

Cogan, J. "Fixed Costs and Labor Supply." Econometrica. 1981.

Mroz, T. "The Sensitivity of an Empirical Model of Married Women's Hours of Work to Economic and Statistical Assumptions." Econometrica. 1987.

C. Empirical Studies on Non-Linear Budget Sets

C.1 Taxes

+ Burtless and Hausman. " The Effect of Taxation on Labor Supply. " Journal of Political Economy. 1978.

+ Blomquist, S., "The Effect oflncome Taxation on the Labor Supply of Married Men in Sweden." Journal of Public Economics. 1983.

+ MaCurdy, Green and Paarsch. "Assessing Empirical Approaches for Analyzing Taxes and Labor Supply." Journal of Human Resources. 1990.

+ Eissa, Nada. "Taxation and Labor Supply of Married Women: The Tax Reform Act of 1986 as a Natural Experiment" NBER Working Paper #W5023, 1995.

C.2 Transfer Programs

Moffitt, R. "Incentive Effects of the U.S. Welfare System: A Review." Journal of Economic Literature. 1991.

Moffitt. ' 'The Econometrics of Kinked Budget Constraints." Journal of Economic Perspectives 1990.

+ Moffitt and Wolfe. "The Effect of the Medicaid Program on Welfare Participation and Labor Supply," Review of Economics and Statistics. 1992.

+ Hoynes, H. "Welfare Transfers in 2-Parent Families: Labor Supply and Welfare Participation under AFDC-UP" Econometrica. 1996.

+ Eissa and Hoynes. "The Earned Income Tax Credit and the Labor Supply of Married Couples." NBER Working Paper #W6856, 1998.

C.3 Child Care

+ Heckman. "The Effects of Child Care Programs on Woman's Work Effort." JPE. 1974.

+ Berger and Black. "Child Care Subsidies, Quality of Care and the Labor Supply of Low-Income Single Mothers." Review of Economics and Statistics. 1992.

+ Ribar. "Child Care and the Labor Supply of Married Women." JHR 1992.

+ Gelbach, Jonah. "How Large an Effect Do Child Care Costs Have on Single Mothers' Labor Supply? Evidence Using Access to Free Public Schooling." Mimeo. 1998.

D. Life-Cycle Models of Labor Supply

Deaton, A. And J. Muellbauer. Economics and Consumer Behavior. p.309-323.

Killingsworth, M. Labor Supply. 1983. Chapter 5.

Macurdy. " An Empirical Model of Labor Supply in a Life-Cycle Setting." JP E 1981.

Heckman and Macurdy." A Life-Cycle Model of Female Labor Supply." Review of Economic Studies. 1980.

r (

Browning, Deaton and Irish. "A Profitable Approach to Labor Supply and Commodity Demand over the Life-Cycle" Econometrica 1985.

+ Camerer, Babcock, Lowenstein and Thaler. "Labor Supply of NYC Taxi Cabdrivers: One Day at a Time." QJE 1997

II. Human Capital

A. Basic Model

Becker. Human Capital. 1962. Chapter 2.

Mincer. Education, Experience and Earnings. 1974. Chapters 1-2.

Willis, R. "Wage Determinants: A Survey and Reinterpretation of Human Capital Earnings Functions." Handbook of Labor Economics, Vol. 1. 1986.

Murphy and Welch. "Empirical Age-Earnings Profiles." ]OLE. 1990.

B. The Returns to Schooling

B.1 Empirical Evidence

Card. "The Causal Effect of Education on Earnings." Handbook of Labor Economics. Vol 3.

Griliches. "Estimating the Returns to Schooling. Some Econometric Problems." Econometrica 1977.

+ Griliches. "Sibling Models and Data in Economics: Beginnnings of a Survey." JPE 1987.

+ Willis and Rosen. "Education and Self-Selection." JP E 1987.

+ Angrist and Krueger. "Does Compulsory Schooling Attendance Affect Schooling and Earnings?" QJE 1991.

+ Altonji. "The Demand for and Return to Education when Educational Outcomes are Uncertain." JOLE 93.

+ Ashenfelter and Krueger. "Estimates of the Economic Return to Schooling from a New Sample of Twins." AER 1994.

B.2 Some Important Methodological Comments

+ Bound and Krueger. "The Extent of Measurement Error in Longitudinal Earnings Data: Do Two Wrongs Make a Right?" ]OLE 1991.

+ Bound, Jaeger and Baker. "Problems with Instrumental Variables Estimation when the Correlation between the Instruments and the Endogenous Explanatory Variable is Weak." JASA 1995.

+ Bound and Solon. "Double Trouble: On the Value of Twins-Based Estimation of the Returns to Schooling." NBER Working Paper #6721. 1998.

C. Returns to School Quality

+ Card and Krueger. "School Quality and Black-White Relative Earnings: A Direct Assessment." QJE 1992.

+ Card and Krueger. "Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States." JPE 1992.

+ Heckman, Layne-Farrar and Todd. "Human Capital Pricing Equations with an Application to Estimating the Effect of Schooling Quality on Earnings." Review of Economics and Statistics. 1996.

+ Murray, Evans and Schwab. "Money Matters After All: Evidence from Panel Data on the Effects of School Resources." Mimeo, 1998.

D. Returns to Training Programs

+ LaLonde. "Evaluating the Econometric Evaluations of Training Programs with Experimental Data." AER 86.

+ Heckman and Hotz. "Choosing Among Alternative Experimental Methods for Estimatingthe Impact of Social Programs: The Case of Manpower Training." JASA 1989.

The recent advances in the training literature are substantial, as it has been an incredibly active area of program evaluation research. Time does not permit the coverage of this extensive literature in this course, so I refer the student to: Heckman, James, Robert LaLonde, and Jeffrey Smith. "The Economics and

Econometrics of Active Labor Market Programs" Handbook of Labor Economics, Vol. III.

E. Life-Cycle Models of Human Capital Investment

Ben Porath. "The Production of Human Capital and the Life Cycle of Earnings." JP E. 1967.

Heckman. " A Life-Cycle Model of Earnings, Learning and Consumption." JPE 1976.

III. Economic Studies of the Family

A. Household Production

Becker, Gary. "A Theory of the Allocation of Time." Economic Journal. 1965. (or first 2 chapters of A Treatise on the Family, 1981)

Gronau, Reuben. "Home Production: A Survey." Handbook of Labor Econonomics. 1986.

Juster and Stafford. "The Allocation of Time: Empirical Findings, Behavioral Models and Problems of Measurement." Journal of Economics Literature. 1991.

B. Marriage and Childbearing

Montgomery and Trussell. "Models of Marital Status and Childbearing." Handbook of Labor Economics.. 1986.

+ Schultz, Paul T. "Changing World Prices, Women's Wages, and the Fertility Transition: Sweden, 1860-1910." Journal of Political Economy. 1985.

+ Johnson and Skinner. "Labor Supply and Marital Separation." AER. 1986.

Hotz and Miller. "An Empirical Analysis of Life-Cycle Fertility and Female Labor Supply." Econometrica. 1988.

+ Angrist and Evans. "Children and Their Parents' Labor Supply: Evidence from Exogenous Variation in Family Size." AER. 1998.

C. Nonmarital Childbearing

+ Bronars and Grogger. "The Economic Consequences of Unwed Motherhood: Using Twins as a Natural Experiment." AER. 1994.

+ Hotz, McElroy and Sanders. "The Effect of Teenage Childbearing on Maternal Outcomes." Mimeo. 1998.

+ Akerlof, Yellen and Katz. "An Analysis of Out-of-Wedlock Childbearing in the United States." QJE. 1996.