Labor Economics

Contents
Chapter 1
Introduction to Labor Economics 1
1-1 An Economic Story of the Labor
Market 2
1-2 The Actors in the Labor Market 3
1-3 Why Do We Need a Theory? 7
1-4 The Organization of the Book 10
Summary 11
Review Questions 11
Web Links 12
Key Concepts 20
Appendix:
An Introduction to Regression Analysis 12
Chapter 2
Labor Supply 21
2-1 Measuring the Labor Force 22
2-2 Basic Facts about Labor Supply 24
2-3 The Worker’s Preferences 27
2-4 The Budget Constraint 31
2-5 The Hours of Work Decision 33
2-6 To Work or Not to Work? 39
2-7 The Labor Supply Curve 42
2-8 Estimates of the Labor Supply Elasticity 45
2-9 Labor Supply of Women 50
2-10 Policy Application: Welfare Programs
and Work Incentives 54
2-11 Policy Application: The Earned Income
Tax Credit 59
2-12 Labor Supply over the Life Cycle 64
2-13 Policy Application: The Decline in Work
Attachment among Older Workers 74
Theory at Work: Dollars and Dreams 40
Theory at Work: Winning the Lotto Will
Change Your Life 43
Theory at Work: Work and Leisure in Europe
and the United States 48
Theory at Work: Cabbies in New York City 69
Theory at Work: Weather and Leisure 73
Theory at Work: The Notch Babies 75
Summary 79
Key Concepts 80
Review Questions 80
Problems 80
Selected Readings 83
Web Links 83
Chapter 3
Labor Demand 84
3-1 The Production Function 85
3-2 The Employment Decision in the Short
Run 88
3-3 The Employment Decision in the Long
Run 94
3-4 The Long-Run Demand Curve for Labor 98
3-5 The Elasticity of Substitution 105
3-6 Policy Application: Affirmative Action and
Production Costs 106
3-7 Marshall’s Rules of Derived Demand 109
3-8 Factor Demand with Many Inputs 112
3-9 Overview of Labor Market
Equilibrium 114
3-10 Policy Application: The Employment Effects
of Minimum Wages 115
3-11 Adjustment Costs and Labor Demand 126
3-12 Rosie the Riveter as an Instrumental
Variable 133
Theory at Work: California’s Overtime
Regulations and Labor Demand 104
Theory at Work: The Minimum Wage and
Puerto Rican Migration 124
Theory at Work: Work-Sharing in
Germany 132
Summary 139
Key Concepts 139
Review Questions 140
Problems 140
Selected Readings 143
Web Links 143
Chapter 4
Labor Market Equilibrium 144
4-1 Equilibrium in a Single Competitive
Labor Market 145
4-2 Competitive Equilibrium across Labor
Markets 147
4-3 Policy Application: Payroll Taxes and
Subsidies 152
4-4 Policy Application: Payroll Taxes versus
Mandated Benefits 161
4-5 Policy Application: The Labor Market
Impact of Immigration 164
4-6 The Economic Benefits from
Immigration 179
4-7 Policy Application: Hurricanes and the
Labor Market 182
4-8 The Cobweb Model 185
4-9 Noncompetitive Labor Markets:
Monopsony 187
4-10 Noncompetitive Labor Markets:
Monopoly 194
Theory at Work: The Intifadah and Palestinian
Wages 146
Theory at Work: The Great Black
Migration 180
Summary 197
Key Concepts 198
Review Questions 198
Problems 198
Selected Readings 202
Web Links 202
Chapter 5
Compensating Wage Differentials 203
5-1 The Market for Risky Jobs 204
5-2 The Hedonic Wage Function 210
5-3 Policy Application: How Much Is a Life
Worth? 215
5-4 Policy Application: Safety and
Health Regulations 218
5-5 Compensating Differentials and Job
Amenities 221
5-6 Policy Application: Health Insurance
and the Labor Market 226
Theory at Work: “People” People 214
Theory at Work: Life On the Interstate 218
Theory at Work: Jumpers in Japan 221
Summary 229
Key Concepts 230
Review Questions 230
Problems 230
Selected Readings 234
Web Links 234
Chapter 6
Human Capital 235
6-1 Education in the Labor Market:
Some Stylized Facts 236
6-2 Present Value 238
6-3 The Schooling Model 238
6-4 Education and Earnings 245
6-5 Estimating the Rate of Return to
Schooling 250
6-6 Policy Application: School Construction
in Indonesia 253
6-7 Policy Application: School Quality
and Earnings 255
6-8 Do Workers Maximize Lifetime
Earnings? 259
6-9 Schooling as a Signal 262
6-10 Postschool Human Capital
Investments 268
6-11 On-the-Job Training 269
6-12 On-the-Job Training and the Age-Earnings
Profile 274
6-13 Policy Application: Evaluating Government
Training Programs 279
Theory at Work: Destiny at Age 6? 249
Theory at Work: War and Children’s
Academic Achievement 258
Theory at Work: Is the GED Better
Than Nothing? 267
Theory at Work: Earnings and
Substance Abuse 278
Summary 281
Key Concepts 282
Review Questions 282
Problems 283
Selected Readings 287
Web Links 287
Chapter 7
The Wage Structure 288
7-1 The Earnings Distribution 289
7-2 Measuring Inequality 291
7-3 The Wage Structure: Basic Facts 294
7-4 Policy Application: Why Did Wage
Inequality Increase? 297
7-5 The Earnings of Superstars 306
7-6 Inequality across Generations 309
Theory at Work: Computers, Pencils,
and the Wage Structure 303
Theory at Work: Rock Superstars 308
Theory at Work: Nature versus Nurture 312
Summary 312
Key Concepts 313
Review Questions 313
Problems 313
Selected Readings 316
Web Links 317
Chapter 8
Labor Mobility 318
8-1 Geographic Migration as a Human
Capital Investment 319
8-2 Internal Migration in the United States 320
8-3 Family Migration 326
8-4 Immigration in the United States 329
8-5 Immigrant Performance in the
U.S. Labor Market 331
8-6 The Decision to Immigrate 337
8-7 Policy Application: Labor Flows
in Puerto Rico 343
8-8 Policy Application: Intergenerational
Mobility of Immigrants 345
8-9 Job Turnover: Facts 350
8-10 The Job Match 354
8-11 Specific Training and Job Turnover 355
8-12 Job Turnover and the Age-Earnings Profile 357
Theory at Work: Migration and EU
Expansion 325
Theory at Work: Power Couples 329
Theory at Work: Hitler’s Impact on the
Production of Theorems 341
Theory at Work: Hey Dad, My Roommate
Is So Smart, I Got a 4.0 GPA 350
Theory at Work: Health Insurance
and Job-Lock 355
Summary 360
Key Concepts 361
Review Questions 361
Problems 361
Selected Readings 365
Web Links 366
Chapter 9
Labor Market Discrimination 367
9-1 Race and Gender in the Labor Market 368
9-2 The Discrimination Coefficient 370
9-3 Employer Discrimination 371
9-4 Employee Discrimination 378
9-5 Customer Discrimination 379
9-6 Statistical Discrimination 381
9-7 Experimental Evidence on
Discrimination 386
9-8 Measuring Discrimination 387
9-9 Policy Application: Determinants of the
Black-White Wage Ratio 391
9-10 Discrimination against Other Groups 399
9-11 Policy Application: Determinants of the
Female-Male Wage Ratio 402
Theory at Work: Beauty and the Beast 377
Theory at Work: Discrimination in the
NBA 382
Theory at Work: “Disparate Impact” and
Black Employment in Police Departments 394
Theory at Work: Shades of Black 398
Theory at Work: 9/11 and the Earnings of
Arabs and Muslims in the United States 401
Theory at Work: Orchestrating
Impartiality 405
Summary 410
Key Concepts 411
Review Questions 411
Problems 411
Selected Readings 416
Web Links 416
Chapter 10
Labor Unions 417
10-1 Unions: Background and Facts 418
10-2 Determinants of Union Membership 422
10-3 Monopoly Unions 428
10-4 Policy Application: Unions and Resource
Allocation 430
10-5 Efficient Bargaining 432
10-6 Strikes 438
10-7 Union Wage Effects 444
10-8 Nonwage Effects of Unions 450
10-9 Policy Application: Public-Sector
Unions 453
Theory at Work: The Rise and Fall of
PATCO 427
Theory at Work: The Cost of Labor Disputes 441
Theory at Work: Occupational Licensing 449
Theory at Work: Do Teachers’ Unions Make
Students Better Off? 454
Theory at Work: Lawyers and Arbitration 456
Summary 457
Key Concepts 457
Review Questions 458
Problems 458
Selected Readings 462
Web Links 462
Chapter 11
Incentive Pay 463
11-1 Piece Rates and Time Rates 464
11-2 Tournaments 471
11-3 Policy Application: The Compensation
of Executives 477
11-4 Work Incentives and Delayed
Compensation 480
11-5 Efficiency Wages 484
Theory at Work: Windshields by the Piece 468
Theory at Work: $15 Per Soul 471
Theory at Work: Incentive Pay Gets You
to LAX on Time 473
Theory at Work: Playing Hard for the
Money 476
Theory at Work: Are Men More
Competitive? 479
Theory at Work: Did Henry Ford
Pay Efficiency Wages? 488
Summary 493
Key Concepts 493
Review Questions 494
Problems 494
Selected Readings 497
Web Links 497
Chapter 12
Unemployment 498
12-1 Unemployment in the United States 499
12-2 Types of Unemployment 506
12-3 The Steady-State Rate of
Unemployment 508
12-4 Job Search 510
12-5 Policy Application: Unemployment
Compensation 517
12-6 The Intertemporal Substitution
Hypothesis 524
12-7 The Sectoral Shifts Hypothesis 526
12-8 Efficiency Wages Revisited 527
12-9 Implicit Contracts 531
12-10 Policy Application: The Phillips
Curve 532
12-11 Policy Application: The Unemployment
Gap between Europe and the United
States 537
Theory at Work: The Long-Term Effects
of Graduating in a Recession 505
Theory at Work: Jobs and Friends 511
Theory at Work: Cash Bonuses and
Unemployment 519
Theory at Work: The Benefits of UI 524
Summary 540
Key Concepts 541
Review Questions 541
Problems 542
Selected Readings 545
Web Links 546
Mathematical Appendix: Some Standard
Models in Labor Economics 547
Indexes 558
Name Index 558
Subject Index 566