SUP 322

Harvard Kennedy School Prof. George J. Borjas Fall 2017 SUP-322 Economics of Labor Market Policies Class: Mondays and...

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Harvard Kennedy School

Prof. George J. Borjas Fall 2017 SUP-322 Economics of Labor Market Policies

Class:

Mondays and Wednesdays, 11:45-1:00, T401

Office: Telephone: Office Hours:

Littauer 304 617-495-1393 Monday, Wednesday, 9:00-10:00, and by appointment Email: [email protected]

Faculty Assistant:

Jean Dombrowski Littauer 211A Telephone: 617-495-1320 E-mail: [email protected]

Overview This course analyzes how labor markets work, with a special emphasis on the impact of government regulations of labor market outcomes. The course presents the standard microeconomic framework for analyzing labor market issues, but will be mainly concerned with using that framework to evaluate the impact of numerous social policies. The topics that will be covered include the determination of wages and employment in the labor market; the effect of social insurance programs on work incentives; tax subsidies and the demand for labor; the employment consequences of minimum wage legislation; the wage impact of immigration; discounting and human capital investment decisions; the determinants of wage inequality; the role of health and safety regulations in the work place; labor market discrimination and affirmative action; the effects of labor unions; and the impact of the unemployment insurance system. Prerequisites: Students must have been exposed to microeconomics at the level of API-101. Requirements: There will be a midterm and a final exam. There will also be occasional problem sets (which will not be graded). Small groups of students are permitted and encouraged to work together on the problem sets. The examinations will be in-class, and books and notes cannot be consulted during examinations. The midterm exam is scheduled for Monday, October 23, 2017; the final exam is scheduled for Wednesday, November 29, 2017. Please check your calendars as soon as possible and avoid any scheduling conflicts for the midterm and final. I will NOT schedule makeup exams except for students with documented dire emergencies (e.g., you are admitted to a hospital).

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Class participation is strongly encouraged. The midterm will count for 40 percent of the course grade; and the final exam for 60 percent. Class Logistics: 1. Students are expected to attend class, do the readings before the lecture, and be prepared to participate in class discussions. No mobile phones, tablets, PDAs, or laptops may be used in class. In short: No electronics of any type are allowed unless there’s a documented need. See me or have the relevant administrator contact me if such a need exists. 2. Tardiness is extremely disruptive to the flow of the class. Please try to make it to the class on time. Readings: The textbook is Labor Economics, by George J. Borjas (McGraw-Hill, Seventh Edition, 2016). You can save money by buying the 5th or 6th edition of the book. The additional readings are designed to expose the student to the models, the research strategies, and the data and empirical findings that so heavily influence the debate over labor market policies. Academic Honesty: Please act sensibly and responsibly. Academic misconduct of any sort cannot be tolerated and everyone should know that HKS takes this issue very seriously. If in doubt about whether any particular action is crossing the line, do not do it.

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COURSE OUTLINE AND READINGS 1. Labor Supply Borjas, Chapter 2. Nada Eissa and Jeffrey R. Liebman. “Labor Supply Response to the Earned Income Tax Credit,” Quarterly Journal of Economics (May 1996): 605-637. Jeffrey Grogger and Charles Michalopoulos, “Welfare Dynamics under Time Limits,” Journal of Political Economy (June 2003): 530–554. Raj Chetty, John N. Friedman, and Emmanuel Saez, “Using Differences in Knowledge across Neighborhoods to Uncover the Impacts of the EITC on Earnings,” American Economic Review (December 2013): 2683-2721.

2. Labor Demand Borjas, Chapter 3. Daron Acemoglu, David H. Autor, and David Lyle, “Women, War and Wages: The Effect of Female Labor Supply on the Wage Structure at Mid-Century,” Journal of Political Economy (June 2004): 497-551. Bruno Crépon and Francis Kramarz, “Employed 40 Hours or Not Employed 39: Lessons from the 1982 Mandatory Reduction of the Workweek,” Journal of Political Economy 110 (December 2002): 1355–1389.

3. Labor Market Equilibrium Borjas, Chapter 4. William J. Carrington, "The Alaskan Labor Market during the Pipeline Era," Journal of Political Economy (February 1996): 186-218. David H. Autor, David Dorn, Gordon H. Hanson, “The China Syndrome: Local Labor Market Effects of Import Competition in the United States,” American Economic Review (October 2013): 2121-2168.

4. The Debate over the Shape of the Labor Demand Curve A. Minimum Wages David Card and Alan B. Krueger, “Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania,” American Economic Review 84 (September 1994): 772–793.

4 Ekaterina Jardim, Mark C. Long, Robert Plotnick, Emma van Inwegen, Jacob Vigdor, Hilary Wething, “Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence from Seattle,” NBER Working Paper No. 23532, June 2017. Michael Reich, Sylvia Allegretto, and Anna Godoey, “Seattle’s Minimum Wage Experience 2015-16,” Center on Wage and Employment Dynamics, UC Berkeley, June 2017.

B. Immigration David Card, “The Impact of the Mariel Boatlift on the Miami Labor Market,” Industrial and Labor Relations Review 43 (January 1990): 245–257. George J. Borjas, “The Wage Impact of the Marielitos: A Reappraisal,” Industrial and Labor Relations Review, 2017. Peri, Giovanni and Vasil Yasenov. “The Labor Market Effects of a Refugee Wave: Applying the Synthetic Control Method to the Mariel Boatlift,” NBER Working Paper No. 21801, December 2015. Clemens, Michael A., and Jennifer Hunt. “The Labor Market Effects of Refugee Waves: Reconciling Conflicting Results,” NBER Working Paper No. 23433, May 2017.

5. Compensating Differentials Borjas, Chapter 5. Orley Ashenfelter and Michael Greenstone, “Using Mandated Speed Limits to Measure the Value of a Statistical Life,” Journal of Political Economy, February 2004. Craig A. Olson, “Do Workers Accept Lower Wages in Exchange for Health Benefits?” Journal of Labor Economics 20 (April 2002, part 2): S91-S114.

6. Human Capital Borjas, Chapter 6. Orley C. Ashenfelter and Alan B. Krueger, “Estimates of the Economic Return to Schooling from a New Sample of Twins,” American Economic Review 84 (December 1994): 1157– 1173. Eric Maurin and Sandra McNally, “Vive la Revolution! Long-Term Educational Returns of 1968 to the Angry Students,” Journal of Labor Economics 26 (January 2008): 1–33. Raj Chetty, John N. Friedman, Nathaniel Hilger, Emmanuel Saez, Diane Whitmore Schanzenbach, and Danny Yagan, “How Does Your Kindergarten Classroom Affect Your Earnings? Evidence from Project STAR,” Quarterly Journal of Economics (November 2011): 1593-1660. Daniel Aaronson and Bhashkar Mazumder, "The Impact of Rosenwald Schools on Black Achievement," Journal of Political Economy (October 2011): 821-888.

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7. The Wage Structure Borjas, Chapter 7. David Card and John E. DiNardo, “Skill-Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles,” Journal of Labor Economics 20 (October 2002): 733-783. Thomas Lemieux, “Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill?” American Economic Review 96 (June 2006): 461–498.

8. Labor Market Discrimination Borjas, Chapter 9. Claudia Goldin and Cecilia Rouse, “Orchestrating Impartiality: The Impact of ‘Blind’ Auditions on Female Musicians,” American Economic Review 90 (September 2000): 715-741. Marianne Bertrand and Sendhil Mullanaithan, “Are Emily and Greg More Employable Than Lakisha and Jamal? A Field Experiment on Labor Market Discrimination,” American Economic Review 94 (September 2004): 991–1013. Kerwin Kofi Charles and Jonathan Guryan, “Prejudice and Wages: An Empirical Assessment of Becker’s The Economics of Discrimination,” Journal of Political Economy 116 (October 2008): 773–809.

9. Unions Borjas, Chapter 10. Alan B. Krueger and Alexandre Mas, “Strikes, Scabs and Tread Separations: Labor Strife and the Production of Defective Bridgestone/Firestone Tires,” Journal of Political Economy (April 2004): 253-289. Caroline Minter Hoxby, “How Teachers’ Unions Affect Education Production,” Quarterly Journal of Economics 111 (August 1996): 671–718. David S. Lee and Alexandre Mas, “Long-Run Impacts of Unions on Firms: New Evidence from Financial Markets, 1961–1999,” Quarterly Journal of Economics (February 2012): 333378.

10. Unemployment Borjas, Chapter 12. Peter Kuhn and Mikal Skuterud, “Internet Job Search and Unemployment Durations,” American Economic Review (March 2004): 218–232.

6 Lawrence F. Katz and Bruce D. Meyer, “Unemployment Insurance, Recall Expectations, and Unemployment Outcomes,” Quarterly Journal of Economics 105 (November 1990): 973–1002. Henry S. Farber and Robert G. Valletta, “Do Extended Unemployment Benefits Lengthen Unemployment Spells? Evidence from Recent Cycles in the U.S. Labor Market,” Journal of Human Resources (Fall 2015): 873-909.