1. Introduction to Labour Economics

KAT.TAL.322 Advanced Course in Labour Economics

Nurfatima Jandarova

March 6, 2024

Course structure

Instructor: Nurfatima Jandarova (nurfatima.jandarova@tuni.fi)

Classes: 90 min lectures twice a week on Wed and Thu 14:00 - 16:00

No class on 21 March!

8 lectures + 2-3 classes devoted to final assessment

All course information on Moodle

Check classrooms on Sisu calendar

No office hours (contact by email)

Final assessment

Short presentation of a research proposal

• Choose a topic related to labour economics

  • Reading list is a good place to start
  • Recent literature surveys (e.g., Journal of Economic Literature)
  • Opinion columns (e.g., VoxEU)

• Individual or groups of 2-3 students

• 20-25 min presentations at the end of April

Important

Form groups (on Moodle) by 15 March!

Requirements to research proposals

• Clear research question
• Importance and contribution

Theoretical

• Clear exposition of model
• Comparative statics/predictions/simulations
• ⭐ Plan for testing with the data

Empirical

• Potential dataset (sample, variables)
• Empirical strategy (challenges, assumptions)
• ⭐ Interpretation/potential mechanisms

Examples:

• RQ: do prestigious universities boost earnings of their graduates?

• Dataset sample: survey data vs wealth of top 1%

• Potential mechanism: class size effect via higher density of teacher resources or peer effects?

Tips

Choose a topic early (weeks 1-2)!

Select one published paper as a “template”¹

Some useful resources:

• The Labour Institute for Economic Research LABORE (Labore) (FI)
• ifo Institute (DE)
• IZA Institute of Labor Economics (DE)
• Centre for Economic Performance (CEP) (UK)

1. Good examples AEJ Best Paper awards

Labour Economics

What is Labour Economics?

Labour economics studies how labour markets work.

Main actors in the labour market:

• workers (sellers)

• firms (buyers)

• government

Why study Labour Economics?

Labour market is the largest market.

• Work accounts for ~30% of waking hours

• Employees account for 70-90% of employment

• Labour income accounts for ~60% of total output

Time spent working

Source: Cahuc (2004)

Labour share in GDP

Ask what they think

Positive vs Normative Economics (do vs should)

Positive economics

How do markets work?

Examples:

• does minimum wage affect employment?
• does AI affect labour demand?
• does tuition fee affect college decision?

Normative economics

How should markets work?

Examples:

• should the minimum wages be abolished?
• should AI firms compensate laid off workers?
• should tuition be financed by loans or grants?

Topics in labour economics

Selected topics

• Models of labour supply and demand

• Human capital

• Technological advances

• Gender inequality

• Intergenerational mobility

Other topics

• Job search and matching

• Migration

• Trade unions

• Taxes and welfare state

• Labour markets and economic growth

Short poll: examples of labour market topics from students

Example: labour supply

Female labour force participation

Female

Male

Countries plotted: Canada, Germany, Finland, United Kingdom, Norway, Sweden, United States
Source: International Labor Organization (ILO) and Olivetti (2013)

Main question: what could have driven the rise? Focus on worker decision.

• What is the role of education? Technological shift? Wars?

• Consequences for

  • gender pay gap

  • ?

Example: labour demand

Computerisation and automation

Digitization of workplaces in Finland

Source: Statistics Finland (2024)

50% of jobs face high risk of computerisation

Source: Frey and Osborne (2017)

Main question: do AI firms fire a lot of people?

• Computerisation and labour demand

• Atlas of jobs and task composition

• Product demand and labour demand

• Wage polarisation

Example: employment

Minimum wages

Minimum wages in Europe

Main question: should Finnish government introduce a min wage at €500/month? €3000/month?

Example: human capital

University expansion

Higher education graduates

Main question: can these levels mean that workers are overeducated? is it bad if people are overeducated?

• Returns to education - cause or consequence?

• How should it be financed?

• Composition of graduates

• Inequality

• Overeducation

Example: inequality

Main question: how inequality can affect market structure?

• Gender inequality, education inequality

• Employment opportunities, wages, job security

• Role of institutions: unions, employment protections, gig economy

• In turn affects shape of future institutions, politics

• Size of pie, can people realise their full potential?

Podcast on inequality: https://ifs.org.uk/articles/when-and-why-should-we-care-about-inequality

Also labour economics topics

Carlana (2019) Implicit Stereotypes: Evidence from Teachers’ Gender Bias

“Teacher stereotypes induce girls to underperform in math”

Doepke and Zilibotti (2019) Love, Money and Parenting

“how economic forces and growing inequality shape how parents raise their children”

Oswald and Powdthavee (2008) Does happiness adapt? A longitudinal study of disability with implications for economists and judges

“people who become disabled go on to exhibit considerable recovery in mental well-being”

Adams-Prassl et al. (2023) The Dynamics of Abusive Relationships

“labor market consequences of cohabiting with an abusive spouse”

Overview of lectures

Mar

6

Introduction to Labour Economics

Mar

7

Labour Supply

Mar

13

Labour Demand

Mar

14

Human Capital

Mar

20

Education Quality

Apr

3

Technological shift and labour markets

Apr

4

Labour market discrimination

Apr

10

Intergenerational mobility

References

Adams-Prassl, Kristiina Huttunen, Emily Nix, and Ning Zhang. 2023. “The Dynamics of Abusive Relationships.” Working Paper. Minneapolis, MN, USA. April 2023. https://doi.org/10.21034/iwp.71.

Cahuc, Pierre. 2004. Labor Economics. Cambridge (Mass.): MIT Press.

Carlana, Michela. 2019. “Implicit Stereotypes: Evidence from Teachers’ Gender Bias*.” The Quarterly Journal of Economics 134 (3): 1163–1224. https://doi.org/10.1093/qje/qjz008.

Doepke, Matthias, and Fabrizio Zilibotti. 2019. Love, Money, and Parenting: How Economics Explains the Way We Raise Our Kids. Princeton University Press.

Frey, Carl Benedikt, and Michael A. Osborne. 2017. “The Future of Employment: How Susceptible Are Jobs to Computerisation?” Technological Forecasting and Social Change 114 (January): 254–80. https://doi.org/10.1016/j.techfore.2016.08.019.

Olivetti, Claudia. 2013. “The Female Labor Force and Long-run Development: The American Experience in Comparative Perspective∗.” November 2013. https://www.bu.edu/econ/files/2012/11/olivetti_chapter_November2013_complete.pdf.

Oswald, Andrew J., and Nattavudh Powdthavee. 2008. “Does Happiness Adapt? A Longitudinal Study of Disability with Implications for Economists and Judges.” Journal of Public Economics 92 (5): 1061–77. https://doi.org/10.1016/j.jpubeco.2008.01.002.

Statistics Finland. 2024. “Use of Information Technology in Enterprises by Year, Size Category of Personnel and Information.” https://statfin.stat.fi/PXWeb/api/v1/en/StatFin/icte/statfin_icte_pxt_13vg.px.