Steven G. Allen                                                                                     Walter Wessels

Nelson 2126                                                                                          Nelson 4106

515-6941                                                                                               515-2879



                                                                           ECG 730

                                                                LABOR ECONOMICS





     1.  To survey the principal problems, models, and results in labor economics.


     2.  To develop the theoretical and empirical tools for doing research in labor economics.





ECG 700 and at least one course in econometrics or regression analysi­s.  Students without any previous cour­ses in labor economics should read the relevant chapters in Ehrenberg and Smith, Modern Labor Economics (1999, 7th ed.) before beginning each section.





          Problem sets (3)                                 21%

Human capital problems

          Short papers (3)                                  30%

          Class and labor workshop                  20%


          Course paper                                      29%


The course will be team taught by Professors Steve Allen and Walter Wessels.  Each will teach half of the course and, in their half, assign and grade problem sets, short papers, and classroom presentations.  Both professors will grade the course paper.   


The short papers should (1) evaluate a journal article or working paper or (2) replicate or extend the empirical work done in an article.  You must write at least one paper from each category. Papers should be about five pages long and should be original.  Plagiarized papers will result in failure in the course. 


The course paper will be an original research paper or a survey of a manageable number of papers on the same subject.  You may expand one of your short papers into the course paper.  The course paper will be due December 14.  It should be about 15 pages long.


Most classes will include lecture with questions and discussion.  Be prepared for each class by reading the starred papers on the reading list.  In some class periods you will make a presentation on papers on the reading list, papers assigned to you, or your own work.   You also are expected to attend the labor workshop, which generally meets on the first and third Wednesday of each month.   




Daniel S. Hamermesh, Labor Demand, Princeton, 1996, paperback


Readings marked by an asterisk are required.  All readings are on reserve in the library or are available from the library or other sources on the web.  Many of the papers published before 1996 can be found in the JSTOR archive.  A number of good surveys can be found in Volumes 1 and 2 of Handbook of Labor Economics, Orley Ashenfelter and Richard Layard, Eds. (North-Holland, 1986) and volumes three of Handbook of Labor Economics, Orley Ashenfelter and David Card, Eds. (North-Holland, 1999).  These are on reserve in the Library.






I.        Data and Methodological Issues. Click here to learn more about data sources in labor economics.


                    *Joshua Angrist and Alan Krueger, “Empirical Strategies in Labor Economics,” in Orley Ashenfelter and David Card (eds.), Handbook of Labor Economics, Vol. 3A, Amsterdam: North-Holland, 1999, pp. 1277-1366.  Available online at 


                    *Daniel Hamermesh, “The Craft of Labormetrics,” Industrial and Labor Relations Review, April 2000, pp. 363-380.  Available online at Business Source Elite.


                    Marilyn Manser, “Existing Labor Market Data: Current and Potential Research Uses,” in John Haltiwanger, Marilyn Manser, and Robert Topel (eds.), Labor Statistics Measurement Issues, National Bureau of Economic Research Studies in Income and Wealth, Vol. 60, Chicago: University of Chicago, 1998, pp. 9-46. 


                    Zvi Griliches, "Economic Data Issues," in Zvi Griliches and Michael Intriligator (eds.), Handbook of Econometrics, Volume III, North-Holland, 1986. Available online at:




II.        Labor Demand


          A.       Static Theory


                    *Daniel Hamermesh, Labor Demand, ch. 2.


          B.       Empirical Specifications


                    *Daniel Hamermesh, Labor Demand, ch. 3. 


          C.      Static Applications


                    *Daniel Hamermesh, Labor Demand, ch. 5.


                    Caroline Hoxby, “How Teachers’ Unions Affect Educational Production,” Quarterly

                              Journal of Economics, August 1996, pp. 671-718.  Available online at JSTOR or

                              Expanded Academic ASAP database


                    Jonathan Gruber, “The Incidence of Payroll Taxation: Evidence from Chile,” Journal of

Labor Economics, July 1997, Part 2, pp. S72-S101.  Available online at ABI-Inform or Expanded Academic Database


                    Jennifer Hunt, “Has Work-Sharing Worked in Germany?” Quarterly Journal of Economics, February 1999, pp. 117-148.  Available online at Expanded Academic ASAP database


                    George Borjas, “Immigrants, Minorities, and Labor Market Competition,” Industrial and Labor Relations Review, April 1987, pp. 382-393.  Available online at Expanded Academic ASAP database


          D.      Dynamic Models and Applications


                    *Daniel Hamermesh, Labor Demand, chs. 6-8.


                    *Daniel Hamermesh and Gerard Pfann, “Adjustment Costs in Factor Demand,” Journal of Economic Literature, September1996, pp. 1264-1292.  Available online at JStor


E.     Dynamic Applications


                    Jaime Saavedra-Chanduví and Máximo Torero, “Labor Market Reforms and Their Impact on Formal Labor Demand and Job Market Turnover: The Case of Peru,” Interamerican Development Bank Working Paper R-394, May 2000.  Available online at


                    Patricia Anderson, “Linear Adjustment Costs and Seasonal Labor Demand: Evidence from Retail Trade Firms,” Quarterly Journal of Economics, November 1993, pp. 1015-1042.   Available online at JSTOR or Expanded Academic ASAP database

                    Marc A. Van Audenrode, “Short-Time Compensation, Job Security, and Employment Contracts: Evidence from Selected OECD Countries,” Journal of Political Economy, February 1994, pp. 76-102.  Available online at JStor


                    Daron Acemoglu and Joshua Angrist, “Consequences of Employment Protection? The Case of the Americans with Disabilities Act,” Journal of Political Economy, forthcoming. Available online at




III.       Labor Supply


          A.   Static Models


                    *John Pencavel, "Labor Supply of Men:  A Survey," Handbook of Labor Economics, Volume 1, 1986, pp. 3-44.


                    *Mark Killingsworth and James Heckhan, “Female Labor Supply: A Survey,” Handbook of Labor Economics, Volume 1, 1986, pp.103-144.


                    *Richard Blundell and Thomas MaCurdy, “Labor Supply: A Review of Some Alternative Approaches,” Handbook of Labor Economics, Volume 3A, 1999, pp. 1559-1591.


B.             Empirical Specifications


                    *Pencavel, op cit, pp. 51-83, 94-95.


                    *Killingsworth and Heckman, op cit, pp. 179-197.


                    Blundell and MaCurdy, op cit, pp. 1591-1689.       


                    *Ernst Berndt, The Practice of Econometrics, Reading: Addison-Wesley, 1991, ch. 11, pp. 614-644.  On reserve.


                    Mark Killingsworth, Labor Supply, Cambridge: Cambridge University Press, 1983, ch. 4.  On reserve.


                    James Heckman, "Sample Selection Bias as a Specification Error," in James P. Smith (ed.), Female Labor Supply.  On reserve. 


                    *Thomas Mroz, "The Sensitivity of an Empirical Model of Married Women's Hours of Work to Economic and Statistical Assumptions," Econometrica, July 1987, pp. 765-800. JStor


                    *James Heckman, "What Has Been Learned About Labor Supply in the Past Twenty Years?" American Economic Review, May 1993, pp. 116-131. JStor


                    Robert Moffitt, "The Econometrics of Kinked Budget Constraints," Journal of Economic Perspectives, Spring 1990, pp. 119-139. JStor


          C.      Empirical Applications


                    Jonathan Gruber, “ Disability Insurance Benefits and Labor Supply,” Journal of Political Economy, December 2000, pp. 1162-1183.  E-Journal subscription


                    Richard Blundell, Alan Duncan, and Costas Meghir, “Estimating Labor Supply Responses Using Tax Reforms,” Econometrica, July 1998, pp. 827-862.



                    Bruce Meyer and Dan Rosenbaum, “Welfare, the Earned Income Tax Credit, and the Labor Supply of Single Mothers,” Quarterly Journal of Economics, August 2001, pp. 1063-1115. Expanded Academic ASAP database


                    Gerald Oettinger, “An Empirical Analysis of the Daily Labor Supply of Stadium Vendors,” Journal of Political Economy, April 1999, pp. 360-392. E-Journal subscription


          D.      Dynamics


                    *Pencavel, op cit, pp. 44-51, 83-94.


                    *Mark Killingsworth, Labor Supply, Cambridge, 1983, ch. 5, pp. 207-239.


                    Thomas MaCurdy, "An Empirical Model of Labor Supply in a Life-Cycle Setting," Journal of Political Economy, December 1981, pp. 1059-1085. JStor


                    *David Card, "Intertemporal Labor Supply: An Assessment," NBER Working Paper No. 3602, January 1991.  (Published in Chris Sims (ed.), Advances in Econometrics, Sixth World Congress, Vol. II, Cambridge: Cambridge University Press, 1994.)



                    Martin Browning, Angus Deaton, and Margaret Irish, “A Profitable Approach to Labor Supply and Commodity Demands over the Life-Cycle,” Econometrica, May 1985, pp. 503-544. JStor


E.     Retirement


                    *Robin Lumsdaine and Olivia Mitchell, “New Developments in the Economic Analysis of Retirement,” in Ashenfelter and Card (eds.) Handbook of Labor Economics, Vol. 3C, 1999, pp. 3261-3307.


                    Courtney Coile and Jonathan Gruber, “Social Security and Retirement,” NBER Working Paper No. 7830, August 2000.  Available online at


                    Orley Ashenfelter and David Card, “Did the Elimination of Mandatory Retirement Affect Faculty Retirement Flows?” NBER Working Paper No. 8378, July 2001.  Available online at


                    Steven Allen, Robert Clark, and Linda Ghent, “Phasing Into Retirement,” NBER Working Paper, forthcoming.



IV.            Changes in the Wage Structure


          A.       Basic Facts


*Lawrence Katz and David Autor, “Changes in the Wage Structure and Earnings Inequality,” Handbook of Labor Economics, Volume 3A, 1999, pp. 1463-1555.


*Chinhui Juhn, Kevin M. Murphy, and Brooks Pierce, “Wage Inequality and the Rise in Returns to Skill,” Journal of Political Economy, June 1993, pp. 410-442.  JStor


John Bound and George Johnson, “Changes in the Structure of Wages in the 1980s: An Evaluation of Alternative Explanations,” American Economic Review, June 1992, pp. 371-392.  Jstor


Lawrence Katz and Kevin M. Murphy, “Changes in Relative Wages, 1963-1987: Supply and Demand Factors,” Quarterly Journal of Economics, February 1992, pp. 35-78.  Jstor


David Card and Thomas Lemieux, “Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis,” Quarterly Journal of Economics, May 2001, pp. 705-746. Available online at Expanded Academic ASAP database


*Peter Gottschalk and Timothy Smeeding, “Cross-National Comparisons of Earnings and Income Inequality,” Journal of Economic Literature, June 1997, pp. 633-687.  JStor


Richard Freeman and Lawrence Katz, Differences and Changes in Wage Structures, Chicago: University of Chicago, 1995, pp. 1-22. 


B.         Role of Technological Change


*Daron Acemoglu, “Technical Change, Inequality, and the Labor Market,” Journal of Economic Literature, forthcoming.  Available online at


*Steven Allen, “Technology and the Wage Structure,” Journal of Labor Economics, April 2001, pp. 440-483.  Available online at


David Autor, Lawrence Katz, and Alan Krueger, “Computing Inequality: Have Computers Changed the Labor Market?” Quarterly Journal of Economics, November 1998, pp. 1169-1213. Available online at Expanded Academic ASAP database


Alan Krueger, “How Computers Have Changed the Wage Structure: Evidence from Microdata, 1984-1989,” Quarterly Journal of Economics, February 1993, pp. 33-60.  JStor


Eli Berman, John Bound, and Zvi Griliches, “Changes in the Demand for Skilled Labor within U.S. Manufacturing: Evidence from the Annual Survey of Manufactures,” Quarterly Journal of Economics, May 1994, pp. 367-397.  JStor



C.         Trade


*Richard Freeman, “Are Your Wages Set in Beijing?” Journal of Economic Perspectives, Summer 1995, pp. 15-32.  JStor


Paul Krugman, “Technology, Trade and Factor Prices,” Journal of International Economics, February 200, pp. 51-71.  Available online from Science Direct


Robert Feenstra and Gordon Hanson, “Global Production Sharing and Rising Inequality: A Survey of Trade and Wages,” NBER Working Paper No. 8372, July 2001. Available online at


D.    Labor Market Institutions


*John DiNardo, Nicole Fortin, and Thomas Lemieux, “Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach,” Econometrica, September 1996, pp. 1001-1044.  JStor


David Lee, “Wage Inequality in the United States During the 1980s: Rising Dispersion or Falling Minimum Wage?” Quarterly Journal of Economics, August 1999, pp. 977-1025.  Available online at Expanded Academic ASAP database


David Card, “The Effect of Unions on Wage Inequality in the U.S. Labor Market,” Industrial and Labor Relations Review, January 2001, pp. 296-315. Available online at Business Source Elite.




V.                  Human Capital


A.         Theory


Gary Becker, Human Capital (2nd edition), Chapter 2, 1975  On reserve.


Theodore Schultz, “The Value of the Ability to Deal with Disequilibria,” Journal of Economic Literature, September 1975, 827-846. JStor


Michael Spence, “Job Market Signaling,” Quarterly Journal of Economics, August 1973, 355-374. JStor


Robert Willis, “Wage Determinants: A Survey and Reinterpretation of Human Capital Earnings,” Chapter Ten in Handbook of Labor Economics, Volume I, 1986.


B.                 Evidence: Returns To Schooling


Card, David, “The Causal Effect of Schooling on Earnings,” Chapter 30 in Ashenfelter and Card, Handbook of Labor Economics, 1999, volume 3A.


Robert Willis and Sherwin Rosen, “Education and Self-Selection,” Journal of Political Economy, October 1979, part 2, S7-S36. JStor


Orley Ashenfelter and Cecilia Rouse, “Income, Schooling, and Ability: Evidence from a Sample of Identical Twins,” Quarterly Journal of Economics, February 1998, 253-84.

Fulltext Expanded Academic Database


C.        Issues in Education


Andrew Weiss, “Human Capital vs. Signaling Explanation of Wages, Journal of Economic Perspectives, 1995. JStor


George Borjas, “Ethnicity, Neighborhoods, and Human Capital Externalities," American Economic Review, 1995.  JStor


Alan Krueger, “Experimental Estimates of Educational Production Functions,” Quarterly Journal of Economics, May 1999, 497-532. Fulltext Expanded Academic Database


Cecilia Elena Rouse, “Private School Vouchers and Student Achievement: An Evaluation of the Milwaukee Parental Choice Program. Quarterly Journal of Economics, May,1998,v.113, n.2, p553-602. Fulltext Expanded Academic Database


VI.                Discrimination


Gary Becker, The Economics of Discrimination, 1957.  On reserve.


Coate, Stephen and Glenn Loury, “Will Affirmative Action Policies Eliminate Negative Stereotypes?” American Economic Review, December 1993, 1220-40. JStor


Neal, Derek, and William Johnson, “The Role of Premarket Factors in Black-White Wage Differences,” Journal of Political Economy, October 1996, 869-895. JStor


Joseph G. Altonji and Rebecca Blank, “Race and Gender in the Labor Market,” Chapter 48, Handbook of Labor Economics, vol. 3C.


Donohue, J. and James Heckman, “Continuous vs. Episodic Change: The Impact of Affirmative Action and Civil Rights Policy on the Economic Status of Blacks,” Journal of Economic Literature, 1992, 1603-1643. JStor


VII.               Minimum Wage


Walter Wessels, Minimum Wages and Teenage Labor Force Participation, unpublished paper, 2001


Charles Brown, “Minimum Wages, Employment, and the Distribution of Income, Handbook of Labor Economics, Chapter 32, volume 3B, 1999.


David Card and Alan Krueger, “Minimum Wages and Employment: A Case Study of the Fast Food Industry in New Jersey and Pennsylvania, American Economic Review, September 1994. JStor


Neumark, David, “The Employment Effects of Minimum Wages: Evidence from a Prespecified Research Design,” Industrial Relations, January 2001, 121-44. E-Journal subscription


VIII.       Unions and Collective Bargaining


*Henry S. Farber, “The Analysis of Union Behavior,” The Handbook of Labor Economics, Chapter 18, Volume 2, 1986.


*Lewis, H. Gregg, “Union Relative Wage Effects,” The Handbook of Labor Economics, Chapter 20, Volume 2, 1986.


Freeman, Richard, “Contraction and Expansion: The Divergence of Private Sector and Public Sector Unionism in the United States,” Journal of Economic Perspectives, Spring 1988, pp. 63-88.  JStor


Freeman, Richard and Medoff, What Do Unions Do?, Basic, 1984.


Allen, Steven, “Can Union Labor Ever Cost Less?,” Quarterly Journal of Economics, May 1987, pp. 347-374.  JStor


Addison, John and Barry Hirsch, “Union Effects on Productivity, Profits, and Growth: Has the Long Run Arrived?” Journal of Labor Economics, January 1989, pp. 72-105 


Wessels, Walter, "Do Unionized Firms Hire Better Workers?" Economic Inquiry,  October 1994: 616-629.


Wessels, Walter, "Do Unions Contract for More Employment?"   The Industrial and Labor Relations Review, 45, October 1991: 181-193.