José-Víctor Ríos-Rull:,

  • Department of Economics, University of Pennsylvania, Philadelphia, PA 19104.

    LECTURES MW 2-3:30PM MCNB 582 In McNeil, 4-168 Off Hours: W 11-12, before and after class and by appointment., email:,
  • The web page to sign up for homework presentations is ready. Click here Use the days where there is class. The page is shared with the labor workshop.

  • Last class is Tuesday at 6pm in the Klein Conference Room.

    What are we doing? A class by class ex-post diary and a forecast of next class.

    1. Jan 13.

      We talked about the class and what it is about. We discussed what are the possible topics to cover (see below). I started talking about wage by age posing a model of human capital accumulation both learning by doing and learning by not doing.

    2. Jan 20.

      I went over the homeworks that I want you to do/present. We finished the discussion of the Ben Porath and learning by doing human capital models and I started talking about mortality and inequality. We started discussing how mortality affects inequality.

    3. Jan 25.

      Paolo started presenting the central idea in Sorkin job market paper about differences in worker's compensation. Thanks Paolo. I then talked about a human capital model with health and survival and how to recover marginal utility modifiers just from the Euler equations.

    4. Jan 27.

      Paolo finished the discussion of Sorkin's paper by telling us how the stuff works in a simple 3 firms (of perhaps different sizes) model. I went on to how to translate a statistical value of life into a formal specification of preferences. measure inequality using the human capital and health model.

    5. Feb 1.

      I talked about how to identify the investment in survival technology to get to a measure of the extent of inequality.

    6. Feb 3.

      We talked about how to identify the technology of health investments. We use some of the material in Health, Consumption and Inequality with Josep Pijoan-Mas.

    7. Feb 8.

      We started developing models of marriage with frictions. We will talk about secular changes. We will use some of the material in Sex Ratios and Long-Term Marriage Trends with Shannon Seitz and Satoshi Tanaka.

    8. Feb 10.

      We talked about how to do Economics and how to use models to make sense of data. We finished developing models of marriage with frictions where only whether to remain together matters but no decisions are made within the couple.

    9. Feb 16.

      We discussed the time inconsistency problem, the GEE and started to look at a simple problem of a couple.

    10. Feb 17.

      We discussed the savings problem of a household when marital status is treated as a shock.

    11. Feb 22.

      Chiara presented her work on estimating residual regional advantages. Thank you Chiara. We discussed the effects of marital risk on savings.

    12. Feb 24.

      We talked a bit about the nitty gritty of solving households' problems, using the within household social planner approach. I talked about how to extract information from life insurance data using these slides.

    13. Feb 29.

      We had two classes on Monday from 5 to 8. We finished the discussion of how to make decisions within the household. We discussed endogenous family formation together with fertility and assortative matching. For this we use these slides. The first part implies agreement so no issue of bargaining. We included some discussion of computational methods, the study of the implications of the randomness in partners, and how to redesign important bits of the joint decisions to avoid disagreements.

    14. March 14

      Anne presented some data on labor force participation of German women. We talked about possible ways of using a model to measure the contribution of early education in the process. We then q talked about bankruptcy highlighting both the time consistency problem and the simultaneous continuous and discrete choice nature of the problem. I laid out the problem that we will characterize in the next classes.

    15. March 16

      We started characterizing the sovereign default problem. In doing this we developed the household problem, the pricing functional, and we started writing down the FOC. We stopped in the middle of working out the envelope theorem. We used these older , these newer or these newest slides.
    16. March 23

      We finished the characterization of the MPE of sovereign default models kusing the GEE. We survived the event.

    17. March 28

      Nils talked about how to solve models with simultaneous continuous and discrete choices. Thanks Nils.

    18. March 30

      We started talking about the role of housing in the Great recession. In particular, how to think of what is what we need.

    19. April 4

      We talked about housing and the Great Recession. We went over model details.

    20. April 6

      We continued talking about housing and the Great Recession. We will go over model and quantitative details using these these slides.

    21. April 11

      Andre presented his project linking inequality and development level. We talked about how to think of hte elements of the model that will be capable of delivering relevant properties.

    22. April 13

      There was a collective presentation on how much do TFP shocks account for variation of hours. We discuss many of its details and of what

    23. April 18

      Cristina presented the issue of severance payments and high and persistent unemployment.

    24. April 20

      We discussed how to map a model with houses to the data insisting that the model has potential to have a recession. We will go over the quantitative details using these slides.

    25. April 25

      We finished the discussion of how a financial shock to households may be the greatest ingredient of the great recession. We used these slides.

    26. April 26

      We finished the course by talking of new venues to think of the central role of houses in Recessions.

    List of Homeworks Organized by batchs.

  • First Homework batch. Do it by April 8.

    1. A Ben Porath problem.

    2. 1.A In a Ben-Porath infinitely lived model assume the last model of human capital investment that we saw in class ( agents die every period with probability λ and are replaced by newborns. These newborns have measure x0 over h. Assume further that x0 puts positive measure only over a finite number of values hi of h. The evolution of human capital is h'=h(1+y ε) and income is given by h(1-α y2/2). Start by setting up the problem and calculating the choice of y. Does it vary over time? 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 15.

    1. A Life Cycle problem.

    2. 2.A Pose and solve a model where agents live I periods, have constant wages and have log utility.

      2.B Now solve this agent problem assuming a Ben Porath type of human capital investment with h'=h(1+y ε) where ε is a constant bigger than 1 and income is given by h(1-y).

      2.C Solve the problem in 2.A assuming that wages can be iid with continuous support in [.5,1.5].

      2.D Solve the problem in 2.B assuming that ε can be iid with continuous support in [.95,1.05].

    Course Description

    This course should be thought of as a (idiosyncratic) Labor course with some link to Macro. It will have particular concerns about demographics (birth, death, marriages, morbility) that should be of interest to people that care about both areas. The relative weight between demographics and more standard labor issues will be determined by demand.

    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.

  • 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.
    1. Wage formation. Over ages, education, sexes, occupation, marital status, states, cities, what not.

    2. Household Types. Single, cohabitating, married, with children, with other adults, with elderly, sharing dwellings. How does it shape people?

    3. Household Formation. How does it change? How is it chosen? Both children and spouses.

    4. Time Allocation. What do we do with our time? Is labor/leisure useful?

    5. Engagement in the labor market. Female labor force participation, choices of hours, retirement. Really?

    6. The Frisch elasticity of labor and how the macro and the micro relate to each other.

    7. Occupational Choice. What career to choose (in a parallel sense). This includes entrepreneurship, and even which legal status to choose.

    8. 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.

    9. Savings and borrowing. With special emphasis on the particular set of U.S. laws that guarantee the right to bankruptcy.

    10. Death and Health. Death is unequal why people die? Does health care matter? Really?

    11. Aggregate Search Models. We will look at how to build protoypical search models with flows of workers entering and exiting the labor force.

    12. 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.

    If you do not have such a directory, please email 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.
    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.