LABOR ECONOMICS
Economics Department, Central European University
Fall, 2005




Lecturers: Professors John S. Earle      and         Almos Telegdy
Nador 11 utca, Rm. 415 (327-3229)                    Nador 11 utca, Rm. 415 (327-3234)
earlej@ceu.hu                                                         telegdya@ceu.hu
Office hours: Mon 3-5, and by appointment         Tue 3-5, and by appointment
 

    The field of Labor Economics applies microeconomic analysis to important social issues
and public policies involving employment, wages, working conditions, and unemployment.
A partial list of issues and policies would include minimum wages, overtime rules, layoff
restrictions, education, job safety, entrepreneurship, wage subsidies, gender and racial
discrimination, immigration and internal migration, labor relations, unions and other institutions,
division of labor within families, unemployment insurance, poverty, welfare policy, and income
inequality.  The main objective of this course is to introduce MA students to some standard
topics in the field as it is practiced by labor economists around the world, while a secondary
goal is to study labor economics research on the particular problems of labor markets in
transition economies, with the aim of encouraging research interest.  The course is a prerequisite
for MA students interested in taking the PhD course in Labor Economics, which is offered in the
Winter Semester.

Requirements and Grading
    Course requirements include regular reading and class participation, an empirical project, a
midterm quiz, and a comprehensive final examination.  The quiz will be held in class during the
period October 12-21 (the exact date to be announced at least a week in advance) and will
count for 15 percent of the course grade.  The final exam will be held during the week scheduled
for this purpose (the department will announce the exact date) and the score will count for 50
percent.  The purpose of the empirical project is to provide an opportunity for students to
experience research using microdata, and the project deliverables consist of a very short research
prospectus and short final paper, with weights of 5 and 30 percent and due dates of October 24
and November 28, respectively.  The analysis will involve application of a standard technique in
labor economics, such as estimating the return to schooling, the gender gap in earnings, the pace
of job reallocation, the determinants of worker mobility, etc.  More information on the project will
be provided early in the term.
    In addition to these requirements, two sets of discussion questions will be distributed roughly
sometime in the middle and again towards the end of the course.  The purpose of these question
sets is to stimulate additional thinking about the course topics, but there is no requirement that the
answers be turned in (nor will they be graded).  The style of questions will be similar to those that
will appear on the examinations.  Some class time will be set aside for going over these questions.

Schedule of topics and readings

    No textbook is fully appropriate for the level and topics of this course, but we draw upon Derek
Bosworth, Peter Dawkins, and Thorsten Stromback, The Economics of the Labour Market,
Addison Wesley Longman, 1996 (referred to below as “BDS”).  More importantly, we will be
studying a number of articles from the professional literature, also listed below.  Photocopies
of the "required" readings (indicated with “*”) will be made available from the department, while
other, "optional" articles are included to encourage interested students to pursue particular interests.
Most of the published papers can be obtained from the CEU library (or jstor.org), and most working
papers can be obtained over the internet (ssrn.com, upjohn.org, iza.org); if these should fail, the
instructors' copies may be loaned out.

I. Methods of Analysis and Overview

*BDS, Chapter 1, 27.1-27.3.
EBRD (European Bank for Reconstruction and Development), Transition Report 2000, EBRD,
London, 2000.  Chapter 5: "Labour Markets, Unemployment, and Poverty During the Transition."

Boeri, T., M.C. Burda, and J. Kollo, Mediating the Transition:  Labour Markets in Central and
Eastern Europe, Report of the Economic Policy Initiative, No. 4, CEPR-IEWS, 1998, Chapter 1.

II. Demand for Labor Services and Job Reallocation

*BDS, Chapters 7, 8.2, 8.4, 9.2, 9.4, 11, 13.
*Basu, Swati, Saul Estrin, and Jan Svejnar, “Employment Determination in Enterprises under
Communism and in Transition:  Evidence from Central Europe,” Industrial and Labor Relations
Review, Vol. 58(5), 353-369, April 2005.

*Revenga, Ana L., “Exporting Jobs?:  The Impact of Import Competition on Employment and
Wages in U.S. Manufacturing.”  Quarterly Journal of Economics, Vol. 107(1), 255-284,
February 1992.

*Davis, Steven J., and John Haltiwanger, "Gross Job Flows," in Handbook of Labor Economics,
Vol. 3B, edited by Orley C. Ashenfelter and David Card, Amsterdam:  Elsevier, 1999.  Chapter 41,
Sections 1-3 and 5, 2712-42, 2749-54.

*Dunne, Timothy, Mark J. Roberts, and Larry Samuelson, "Plant Turnover and Gross Employment
Flows in the U.S. Manufacturing Sector," Journal of Labor Economics, 7(1), 48-71, January 1989.

*Haltiwanger, John C., and Milan Vodopivec, "Gross Worker and Job Flows in a Transition Economy:
An Analysis of Estonia."  Labour Economics, Vol. 9(5), 601-630, November 2002.

Christev, Atanas, and Felix FitzRoy, "Employment and Wage Adjustment:  Insider-Outsider Control
in a Polish Privatization Panel Study."  Journal of Comparative Economics, Vol. 30, 251-275, 2002.

Konings, Jozef and Hartmut Lehmann, "Marshall and Labor Demand in Russia: Going back to Basics,"
Journal of Comparative Economics, Vol. 30, 134-159, March 2002.

Boeri, Tito, and Katherine Terrell, “Institutional Determinants of Labor Reallocation in Transition,”
Journal of Economic Perspectives, Vol. 16(2), February 2002.

Konings, Jozef, Hartmut Lehmann, and Mark Schaffer, "Job Creation and Job Destruction in a
Transition Economy:  Ownership, Firm Size, and Gross Job Flows in Polish Manufacturing,
1988-91," Labour Economics, Vol. 3(3), October 1996.

Bilsen, Valentijn, and Jozef Konings, "Job Creation, Job Destruction and Growth of Newly
Established Private Firms in Transition Economies:  Survey Evidence from Bulgaria, Hungary,
and Romania," Journal of Comparative Economics, Vol. 26(3), 429-45, September 1998.

Brown, J. David, and John S. Earle, "Gross Job Flows in Russian Industry Before and After Reforms:
Has Destruction Become More Creative?" Journal of Comparative Economics, 30(1), March 2002.

Haltiwanger, John C., and Milan Vodopivec, “Worker Flows, Job Flows, and Firm Wage Policies:
An Analysis of Slovenia,” Economics of Transition, Vol. 11(2), 2003.

III. Supply of Labor Services and Worker Mobility

*BDS, Chapters 3.1 – 3.7, 5.1 – 5.5.
Killingsworth, Mark, Labor Supply, Cambridge:  Cambridge University Press, 1983, pp. 1-45,
67-87, 106-9, 130-50.

*Juhn, Chinhui, “Decline of Male Labor Market Participation:  The Role of Declining Market
Opportunities.”  Quarterly Journal of Economics, Vol. 107(1), 79-121, February 1992.

*Bonin, Holger, and Rob Euwals, "Labor Supply Preferences of East German Women after
German Unification," WDI Working Paper, December 2001.

*Kolev, Alexandre, and Anne Pascal, “What Keeps Pensioners at Work in Russia  Evidence from
Household Panel Data.”  Economics of Transition, Vol 10(1), 29-53, 2002.

*Sabirianova, Klara Z., "The Great Human Capital Reallocation:  A Study of Occupational Mobility
in Transitional Russia."  Journal of Comparative Economics, Vol. 30(1), 191-217, March 2002.

Campos, Nauro, and Aurelijus Dubasinskas, “Occupational Mobility and Economic Reform,”
working paper, May 2005.

Sorm, Vit, and Katherine Terrell, "Sectoral Restructuring and Labor Mobility: A Comparative
Look at the Czech Republic," Journal of Comparative Economics, Vol. 28, 431-55, 2000.

Earle, John S., "Industrial Decline and Labor Reallocation in Romania," working paper, 1997.

Saget, Catherine, "The Determinants of Female Labor Supply in Hungary," Economics of
Transition, Vol. 7(3), 575-91, 1999.

Turunen, Jakko, "Leaving State Sector Employment in Russia," Economics of Transition,
Vol. 12(1), 129-52, 2004.

Earle, John S., and Zuzana Sakova, "Business Startups or Disguised Unemployment?  Evidence
on the Character of Self-Employment from Transition Economies," Labour Economics,
September 2000.
Andrienko, Yuri, and Sergei Guriev, "Determinants of Interregional Mobility in Russia," Economics
of Transition, Vol. 12(1), 1-27, 2004.

Saint-Paul, Gilles, "The Brain Drain:  Some Evidence from European Expatriates in the US."
IZA Working Paper No. 1310, September 2004.

IV. Wage Differentials I:  Human Capital, Compensating Differentials, Discrimination

*BDS, Chapters 16, 24, 26.3.2.

Campos, Nauro, and Dean Jolliffe, "After, Before and During: Returns to Education in the
Hungarian Transition," WDI Working Paper, 2002 (http://www.wdi.bus.umich.edu/).

*Chase, Robert, "Markets for Communist Human Capital:  Returns to Education and Experience
in the Czech Republic and Slovakia," Industrial and Labor Relations Review, Vol. 51 (3),
April 1998.

*Kertesi, Gábor and János Köll?, "Economic Transformation and the Revaluation of Human
Capital – Hungary, 1986 – 1999," Research in Labor Economics, Vol. 20, 2002.

Sabirianova Peter, Klara, "Skill-Biased Transition: The Role of Markets, Institutions and
Technological Change," IZA Discussion Paper No. 893, October 2003.

Orazem, Peter F., and Milan Vodopivec, “Value of Human Capital in Transition to Market:
Evidence from Slovenia,” European Economic Review, Vol. 41 (3-5), April 1997, pp. 893-903.

*Brainerd, Elizabeth, "Women in Transition:  Changes in Gender Wage Differentials in Eastern
Europe and the Former Soviet Union," Industrial and Labor Relations Review, Vol. 54(1), 138-62,
October 2000.
*Jurajda, Stepan, “Gender Wage and Segregation in Enterprises and the Public Sector in Late
Transition Countries,” Journal of Comparative Economics, 31, 199-222, 2003.

*Berger, Mark, Glenn C. Blomquist, and Klara Sabirianova Peter, “Compensating Differentials in
Emerging Labor and Housing Markets: Estimates of Quality of Life in Russian Cities.”  IZA
Working Paper No. 900, October 2003.

Munich, Daniel, Jan Svejnar, and Katherine Terrell, "Returns to Human Capital under the
Communist Wage Grid and During the Transition to a Market Economy," WDI Working Paper
No. 272a, 2002.

Hunt, Jennifer, "The Transition in East Germany: When is a Ten-Point Fall in the Gender Wage
Gap Bad News?"  Journal of Labor Economics, Vol. 20/1: 148-69, 2002.

Flanagan, Robert J., "Were Communists Good Human Capitalists? The Case of the Czech
Republic," Labour Economics, Vol. 5, 295-312, 1998.

Andren, Daniela, John S. Earle, and Dana Sapatoru, “The Effects of Systemic Reforms on the
Return to Schooling: Evidence from Romania, 1950-2000,” Journal of Comparative Economics,
June 2005.

Ogloblin, Constantin, "The Gender Earnings Differential in the Russian Transition Economy,"
Industrial and Labor Relations Review, Vol. 52(4), 602-27, July 1999.

Orazem, Peter, and Milan Vodopivec, "Male-Female Differences in Labor Market Outcomes
During the Early Transition to Market:  The Cases of Estonia and Slovenia," Journal of Population
Economics, Vol. 13, 283-303, 2000.

Jolliffe, Dean, “The Gender Wage Gap in Bulgaria:  A Semiparametric Estimation of Discrimination,”
Journal of Comparative Economics, 30, 276-295, 2002.

V. Wage Differentials II:  Industry, Ownership, Size

*BDS, Chapter 22

*Krueger, Alan B. and Lawrence H. Summers, “Efficiency Wages and the Inter-Industry Wage
Structure,” Econometrica, 56(2), 259-293, March 1988.

Goux, Dominique, and Eric Maurin, “Persistence of Interindustry Wage Differentials:  A
Reexamination Using Matched Worker-Firm Panel Data,” Journal of Labor Economics,
17(3), 492-533, 1999.

*Brown, J. David, John S. Earle, and Almos Telegdy, “Does Privatization Hurt Workers?  Evidence
from Comprehensive Manufacturing Firm Data in Four Countries,” mimeo, 2005.

Brainerd, Elisabeth, “Five Years After:  The Impact of Mass Privatization on Wages in Russia,
1993-1998,” Journal of Comparative Economics, 30, 160-190, 2002.

*Almeida Rita, “The Effects of Foreign Owned Firms on the Labor Market,” IZA Discussion Paper
No. 785, May 2003.

Martins, Pedro, “Do Foreign Firms Really Pay Higher Wages?  Evidence from Different
Estimators,” IZA Discussion Paper No. 1388, November 2004.

*Oi, Walter Y., and Todd I. Idson, “Firm Size and Wages,” in Handbook of Labor Economics,
Vol. 3B, edited by Orley C. Ashenfelter and David Card, Amsterdam:  Elsevier, 1999.
Chapter 33, Sections 1-3, 2166-2189.

VI.  Displaced Workers and Unemployment

*BDS, Chapters 3.8, 26.5, 28.

*Kletzer, Lori, “Job Displacement,” Journal of Economic Perspectives, Vol. 21(1), Winter 1998.

*Ham, John C., Jan Svejnar, and Katherine Terrell, “Unemployment and the Social Safety Net
During Transitions to a Market Economy:  Evidence from the Czech and Slovak Republics,”
American Economic Review, Vol. 88(5), 1117-1142, December 1998.

*Jacobson, Louis, Robert LaLonde, and Daniel Sullivan, "Earnings Losses of Displaced Workers,"
American Economic Review, 83(4), 685-709, November-December 1993.

Boeri, Tito, "Learning from Transition Economies:  Assessing Labor Market Policies across Central
and Eastern Europe," Journal of Comparative Economics, 25, 1997.

Orazem, Peter, Milan Vodopivec, and Ruth Wu, "Worker Displacement During the Transition:
Experience from Slovenia."  Economics of Transition, 13(2), 311-340, 2005.

Lehmann, Hartmut, Kaia Phillips, and Jonathan Wadsworth, "The Incidence and Cost of Job Loss
in Estonia," Journal of Comparative Economics, 33(1), 59-87, March 2005.