Econ450 Syllabus.

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Wages and the Labor Market (Econ 450)
Instructor: Chao Fu
Office: 6432 SS, 1180 Observatory Drive
Classes: TuTh 11:00AM - 12:15PM SOC SCI 5106
Office Hours: Thu. 12:15-1:15pm, Fri. 1-2pm
I. Basic Goals:
The object is to provide students with a detailed outline of the basics of labor economics. I will spend most of the time going through the theory and ideas that form the fundamentals of labor economics. However, it is important that students are aware of the simple facts of labor market in the US. Using the theory and facts, it should be possible to evaluate labor market policies.

II. Prerequisite: The course is designed for economics majors and others who are already seriously interested in economics. Economics 301 is a prerequisite. III. Evaluation:
There are two methods used to calculate the course grade; I will choose for you at the end of the term whichever method gives you the higher grade. Method 1 is designed to reward students who show consistent progress throughout the course, while Method 2 rewards those students who show improvement over the semester. Method1:

Homework and participation
First midterm
Second midterm


Date: Sept. 25th, 2014 class time
Date: Dec. 14th, 2014, 12:25-2:25pm

Homework and participation
First midterm
Second midterm


Date: Sept. 25th, 2014 class time
Date: Dec. 14th, 2014, 12:25-2:25pm

IV. Textbook (required): Labor Economics, George J, Borjas (McGraw-Hill 6th edition) You can also use the 5th edition, which is much cheaper, and the content is much the same.

V. Course outline:
My lecture will be based on the textbook, highlighting fundamentals of labor economics that students should grasp. I plan to cover the following topics, but changes could be made, subject to the progress of the course.

1. The basics
The subject of labor economics
Theory and facts
2. Labor Supply
(1) The basic static individual labor supply
The labor/leisure choice and indifference curve
The budget constraint
The hours of work decision
Income and substitution effects
Individual labor supply
Effects of taxes and subsidies
(2) Extensions
Life cycle labor supply
Labor supply over business cycle
Family labor supply
Fertility and labor supply
3. Labor Demand
Inputs and the production function
Employment decision: short-run and long-run
Elasticity of substitution
Derived demand
Effects of taxes and subsidies
4. Labor market equilibrium
Equilibrium in the competitive labor market
Non-competitive labor markets: monopsony and monopoly
Effects of taxes and subsidies
5. Wage differentials
The hedonic wage function
Labor supply and risk
Safety and health regulations
6. Human capital
Education and income
Present value calculations
Costs and returns to schooling

Age-earning profile
7. Wage structure
Earning distribution
Why do wages differ?
Changes in the earning distribution
Intertemporal income distribution
8. Labor Mobility
Mobility and migration
Immigration in the US
Models of immigration
Benefits and costs of immigration
Immigration policy
9. Discrimination
Discrimination in the US
Employer discrimination
Customer discrimination
Statistical discrimination
Measuring discrimination
10. Labor unions
The decline of unions in the US
Models of Unions
Union wage effect
11. Work incentives
Piece rates and time rates
Executive compensation
Efficiency wages
12. Unemployment
Unemployment in the US
Job search
Steady-state unemployment
Changes in UI payments
Implicit contracts

VI. Web components: Lecture notes, homework, answer keys and other relevant materials will be posted on the Econ 450 course site.
VII. How to prepare for Econ 450?
1. Skim the assigned reading before lecture (if any)
2. Print out the lecture...
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