John S. Earle
Winter, 1992-93
Department of Economics

Course Description

"The same persons who cry down Logic will generally warn you against Political Economy. It is unfeeling, they will tell you. It recognises unpleasant facts. For my part, the most unfeeling thing I know of is the law of gravitation: it breaks the neck of the best and most amiable person without scruple, if he forgets for a single moment to give heed to it. The winds and waves too are very unfeeling. Would you advise those who go to sea to deny the winds and waves--or to make use of them, and find the means of guarding against their dangers? My advice to you is to study the great writers on Political Economy, and hold firmly by whatever in them you find true; and depend upon it that if you are not selfish or hard-hearted already, Political Economy will not make you so."
John Stuart Mill

The primary objective of this course is the application of economic analysis to labor markets, with the goal of increasing our understanding of important social issues such as discrimination, job safety, unionism, migration, poverty, and unemployment. We will analyze these issues theoretically and empirically not only in the context of the market economies of the U.S. and other western countries, but also examine them under the particular conditions of the East European economies in transition. We may also cover some selected topics in industrial organization, particularly under the headings of the theory of the firm and the economics of privatization.. There will be several written assignments and empirical exercises in addition to a midterm and a final exam.

The main text for the course is Robert F. Elliot, Labor Economics: A Comparative Text, McGraw-Hill, 1991, referred to below as LE. Supplementary readings on topics not covered by the text -- privatization, corporate governance, producer cooperatives (labor-managed firms), and labor markets in transition economies -- as well as topics deserving greater attention than afforded in the text will be provided later. This outline is only tentative; we may adapt and/or alter it as we go. The approximate number of class meetings to be devoted to each topic appears below in parentheses.

I. Introduction (2)

A. Why study the labor market? Basic concepts and data in labor economics

LE, Chapter 1
T. Boeri and M. Keese, "Labor Markets and the Transition in Central and Eastern Europe," OECD Economic Studies No. 18, Spring 1992.

B. Overview of Privatization.

J. Earle, R. Frydman, and A. Rapaczynski, "Privatization Policies in Eastern Europe: Diverse Routes to a Market Economy."

II. Demand for Labor Services (3)

LE Chapters 8, 9, and pp. 301-5 of chapter 10.
Waiter Y. Oi, "Labor as a Quasi-Fixed Factor," Journal of Political Economy, Vol. 70, No. 6, December 1962, pp. 538-55.
C. Brown, "Minimum Wage Laws: Are They Overrated?" Journal of Economic Perspectives, Summer 1988, pp. 133-46.

III. Supply of Labor Services (5)

A. Labor Force Participation and Hours of Work

LE, Chapters 2-5.
P. Robbins, "A Comparison of the Labor Supply Findings from the Four Negative Income Tax Experiments," Journal of Human Resources, Fall 1985, pp. 567-583.

B. Acquisition of Skills

LE, Chapter 6.
T.W. Schultz, "Investment in Human Capital," American Economic Review, Vol. 51, No. 1, March 1961, pp. 1-17.
A. Krueger and J. Pischke, "A Comparative Analysis of East and West German Labor Markets: Before and After Unification," NBER Working Paper No. 4154, August 1992.

IV. Matching and Mobility (1)

LE, Chapter 10.

V. Compensating Differentials (1)

LE, Chapter 11.

VI. Internal Labor Markets and contracts (2)

LE, Chapter 12.
O. Williamson, Economic Institutions of Capitalism, Chapters 9 and 10.

VII. Producer Cooperatives (1)

Reading to be provided.

VIII. Unions (2)

LE, Chapters 7, 14.
A. Rees, The Economics of Trade Unions, University of Chicago Press, 1989, Chapters 1 and 2, pp. 1-45.
X R. Freeman, "What Direction for Labor Market Institutions in Eastern and Central Europe?" February 1992.

IX. Discrimination (1)

LE, Chapter 13.

X. Unemployment (2)

LE, Chapter 15.
T. Boeri, "Unemployment in Central and Eastern Europe: Transient or Persistent?"
A. Nesperova, "Unemployment, Active Employment and Income Support in Czechoslovakia."

CRC-Curriculum Resource Center
CEU Budapest, Hungary
Modified: May, 1996


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