Department of Economics, University of Minnesota,
Minneapolis, MN 55455.
Tue and Th 12:10 pm to 13:50. In Hanson Hall,
4-170. Off Hours: Before and after class and by
appointment. http://www.econ.umn.edu/~vr0j/ec8503-13/,
email:
vr0j@umn.edu,
Phone-(612) 625-0941 Fax: (612) 624-0209
Fed Phone (612) 204-5528
The web page to sign up for homework presentations is
ready. Click
here
What are we doing? A
class by class ex-post diary and a forecast of next class.
Mar 26.
We talked about the class and what it is
about. We discussed what are the possible topics to cover
(see below). We discussed every student's interests in
labor and how they may relate to the class.
Mar 28.
We talked about wages. We started by
discussing wages over the life cycle which are
hump-shaped. We talked about 3 theories. Exogenous wages,
learning by doing and learning by not doing (Ben
Porath). We wrote the dynamic problem associated to the
latter two. I derived the FOC and argued that to solve
them going to the last period and realization that there
is not capital value to learning then is the key
insight. I ask for homeworks to this part which are due
April and are labeled Second homework bath. We also
looked at a simple human capital accummulation model were
the value function is homogenous of degree 1. In it,
agents die every period with probability λ. I asked
as a homework (Batch 1 due April 3) to compute mean and
variance of earnings. We started to talk about the
evolution of the skill premium.
April 2.
Rocio started presenting HW 1. She
will finish Tue Ap 9. Thanks Rocio. We finished studying
the determinants of the the skill premium. We talked
about the Mortensen-Pissarides model of labor
determination, on our way to see the Shimer vs
Hagedorn-Manovski discussion and the new contribution by
Christiano et al.
April 4.
We went to Fatih's seminar. It was a
great one. Then we went over in class with the problems in
the homework and discussed them.
April 9.
I discussed competitive search in the
context of the lucas tree with search and household effort
moving productivity.
April 11.
There is no class. As the classes are
typically longer than the scheduled 1:25min, we may or may
not recover it.
April 16.
Arun presented the solution to the
savings problem. Thanks Arun. Gero presented a
modelization of the earnings process consistent with the
findings of Guvenen et al (2013). I then went over the
problem of the determination of the price in Nash
bargaining environments.
April 18.
Gero updated his presentation of the
representation of labor earnings. There is still a bit to
go. Thanks Gero. I then complemented the issue by talking
about the cross-sectional properties of hours worked (and
theories to explain it) and of the variance of hours
worked and how it relates to Fatih's findings. I
referenced two some very old papers of mine
(this
one
and this
one). We then finally started talking about what is a
household as different from a person. We looked at the
various issues it raises. How to allocate goods within it,
how to set who marries whom and how
April 23.
We talked about how to think of a
person grown up and what are the decisions that it takes
(how hard to work, whether to engage in sex, when to leave
the parental home). We then posed a simple model of
household formation where the fraction of young people
leaving with their parents in endogenous and we applied to
the determination of aggregate hours worked. In doing so
we talked about the Frisch elasticity of labor.
April 25.
We went to Bils seminar. We discussed
what was good about it. Then Radek
presented homework 3. Thanks Radek.
April 30.
Martin presented "Labor Market Search
in Emerging Economies". Thank Martin. He showed very
nicely that the Shimer puzzle can come as an asset in
certain contexts. I then talked about how to model an
evolving family composition in the context of a saving
problem a la Aiyagari. Think
of Families
as Shocks. I invited to
present this
paper by Blundell et al.
May 2.
Hazal presented "Divorce, Remarriage and
Welfare: A General Equilibrium Approach". Thanks
Hazal. That allows us to discuss how to think of
marriage. Why people do it. We also discussed the
relevance of increasing returns of the matching
function. Daniela then
presented this
paper by Blundell et al. We learned how to pose the
joint problem of acquiring education, and choosing whether
to work or not in the context of a model related to the
families as shocks were all relevant decision making
problems are subsumed by letting the woman be the decision
maker.
May 7.
We talked about models with endogenous
household formation. We used the first
half some
of these slides.
May 9.
We will finish talking about endogenous
household formation. We will talk about occupations and
maybe also credit scores. We may add another class. More soon.
List of Homeworks Organized
by batchs.
First Homework batch. Do
it by April 3.
A Ben Porath problem.
1.A In the last model of human capital investment
that we saw in class ( agents die every period with
probability λ and are replaced. The newborns are born
with measure x^{0} over h. Assume further that
x^{0}
puts positive measure only over a finite number of values
h_{i} of h.
The evolution of human
capital is h'=h(1+y ε) and income is given by
h(1-α y^{2}/2). Calculate a formula for the
long run value of average income.
1.B Give another formula for the long run variance
of income.
1.C State the problem with a progressive income tax
and lump sum redistribution. Comment it.
1.D Change the functional form for income so that
whether effort or luck matters is a function of one
parameter. Comment it.
Second Homework batch. Do
it by April 10.
A life cycle problem.
2.A Solve for the assets and consumption of the
houeholds in an economy where they live 90 years (assume they
are born at 16) and have the wage profile and of American
persons. (Find it from somewhere in the literature, later we
will compute it from data). Let the agents have standard per
period preferences over consumption with risk aversion
coefficient of 2, discount rate of 1. and interest rate of
3\%. Plot them. You should use the three methods we discussed
in class to solve this problem (if you want you can solve in
five year intervals, for which you have to adjust the interest
and discount rates). These methods were forward and backward
iterations that transform the problem into one equation and
one unknown and brute force.
2.B Now make changes in preferences so that the
induced profiles for consumption are inversed U-shaped. Plot
them too.
2.C Briefly explain the computational logic that you
followed. (I will talk a bit in class for this but start
now).
A more complicated life cycle
problem.
3.A Choose a learning-by-doing technology (explain
how you did so) and solve for the optimal paths of
consumption, savings hours worked, productive hours worked
and wages. Plot them. Do they match the data?
3.B Choose a Ben-Porath learning-by-not-doing
technology (explain how you did so) and solve for the
optimal paths of consumption, savings hours worked,
productive hours worked and wages. Plot them. Do they match
the data?
3.C Specify a model with both a learning-by-doing
and a learning-by-not-doing technology (explain how you did
so) and solve for the optimal paths of consumption, savings
hours worked, productive hours worked and wages. Plot
them. Do they match the data?
3.D
Discuss your findings
Course Description
This course should be thought of as a Labor course with a
close link to Macro that should be of interest to people that
care about both areas. Its main purpose is to link models and
data i.e. to answer quantitative questions that we are
interested in (in the process of doing so, some interesting
theoretical questions arise). We will develop tools by stating
general questions, and then discussing how to approach its
answer.
This is a Ph.D. course not a Masters course. We are not here
to learn about existing work but to learn about how to do
work, and, therefore, it requires to do some things.
Format.
Every class except the first one we will devote the first
twenty minutes or so to students presentations of
homeworks. I expect professional competence in this regard.
Relation to 8501. This course
complements 8501. We will overlap a bit, but there are enough
differences to make them all worthwhile to the enthusiast.
Content. This year, I want to change
the course a bit to taylor students' particular interests.
In terms of possible content here is a list of some of the
issues that we may also cover. In the end we will do a combo
of both things depending on interest, energy, and mood.
Wage formation. Over ages,
education, sexes, occupation, marital status,
states, cities, what not.
Household Types. Single,
cohabitating, married, with children, with other
adults, with elderly, sharing dwellings. How does
it shape people?
Household Formation. How does
it change? How is it chosen? Both children and spouses.
Time Allocation. What do we do
with our time? Is labor/leisure useful?
Engagement in the labor market.
Female labor force participation, choices of hours,
retirement.
Really?
The Frisch elasticity of labor and how the
macro and the micro relate to each other.
Occupational Choice. What career
to choose (in a parallel sense). This includes
entrepreneurship, and even which legal status to
choose.
Crime. We will think of it in
part as a form of occupational choice (for property
crime). But we will also talk in terms of murder. How
could we think of it.
Savings and borrowing. With
special emphasis on the particular set of U.S. laws
that guarantee the right to bankruptcy.
Death and Health. Death is
unequal why people die? Does health care matter?
Really?
Aggregate Search Models. We will
look at how to build protoypical search models with
flows of workers entering and exiting the labor
force.
Aggregate Fluctuations and Macro in
general. Are any of these things changing over
time?
Course Requirements
Students will place the solution to the homeworks and to
other requirements in electronic form.
You should have a subdirectory with your id name and the write to
read an write in /pkg/8503-13
If you do not have such a directory, please email
4help@umn.edu asking for one.
There are various types of requirements that are a necessary
part of the course, all of which have to be fulfilled.
Regular Homeworks.The ones posted
here. Full credit only if on time. Partial credit otherwise.
Class Presentations Every student
will make at least two class presentations with at least
one being of a subset of a homework. The first
presentation should take no more than 15 minutes and it
will be absolutely professional. Every second wasted,
every statement not planned, every bad thing will be
highlighted. The second presentation (that will depend on
class size and interests) maybe on a paper or on another
homework.
Referee Report. I will assign a
paper to each of you as we go along to write a referee
report and perhaps also to present the paper in no more
than 20 minutes. The refere report should be no longer
than five pages and should contain a clear and concise
exposition of the main points of the article as well as a
critical evaluation of the article's contributions. In
addition, you should write a letter to the editor with your
personal recommendations. If very good, I will use them,
anonymously.
Wikipedia Article. Optional, but
excellent training. This is something that should be done by
the end of the course. The moment you post it email me and
place a copy in your directory. Think of a topic of the
course no matter how silly.
This course believes drastically in Learning by Doing. To learn
the material that we cover requires that students do all the
homeworks in a timely manner. Given the way to collect the
homeworks, timeliness is automatically recorded. I will look at
what is done weekly.
Grading Rules and Registration.
To do superbly in the course, registered students have to do all
the requirements well.
For those that do not register but take the course, I recommend
that they do the homeworks. We learn to solve problems by facing
them. Learning jointly with others greatly speeds the
process.
In any case, the University is to help you learn and become
a great economist not to issue grades, so use the course in
the way you say it is best for you. If all equal, register
so that there is evidence that the course is useful.
What about the prelim?
The prelim will consist on some problem or question or
discussion of something that has been at the core of the
course. Take a look at the last two prelims (from Kara, I think)
and the homepages of the courses of previous years (via my
homepage) for clues.