Econ 8503 Wages and Employment Spring 2015

José-Víctor Ríos-Rull:,

  • Department of Economics, University of Minnesota, Minneapolis, MN 55455.
  • Tue and Th 12:20 pm to 13:50. In Hanson Hall, 4-168 Off Hours: Before and after class and by appointment., email:, 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 Use the days where there is class. The page is shared with the labor workshop.

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

    1. Mar 24.

      We talked about the class and what it is about. We discuss what are the possible topics to cover (see below). I asked for somebody to start talking about time use. Another important thing to talk about that I am still asking is a recent paper by Taber and Vejlin.

    2. Mar 26.

      Tsan-Yao (Yao) talked about time use (Thanks Yao). We also talked about how to highlight important properties of it. Then I went on to talk about the learning by doing model and the learning by not doing model (the Ben Porath model). Jorge volunteered some slides on this model (Thanks Jorge). I asked how to solve these two models by posing shooting algorithms.
    3. Mar 31.

      Sergio presented the solution to the human capital accumulation model. The learning by doing model. We talked about various features of this model. I asked everybody to write and solve a life-cycle problem of savings with discrete shocks to earnings. ALl should do (or be able to do) this. This problem should be posed recursively. I also ask for some people to look at how to solve the problem with two dimensions, assets and a continuous shock, and to propose innovative ways of solving it. A possible place to start is here. We started talking about what a family could be by posing possible arguments of the utility function. We also talked about how a decision can be arrived to when there are private and locally public goods.
    4. April 2.

      We discussed how decisions are made within families and how families shapes preferences. We talked about various features of family models. How to pose preferences, how to pose bequests, what is the meaning of complete markets. We ended with the posing of the problem of the single agents.
    5. April 7.

      Jorge presented how to solve the Aiyagari model with labor as a continuous variable. Thanks Jorge. During the presentation we talked about many issues associated with the strategy to solve the problem as well as with the meaning of the solution and where are the difficulties. Thanks Jorge.
    6. April 9.

      We went over the problem of a married couple that has to choose savings. We discussed three possible mechanisms to make such a choice. We will see how important marital formation is by looking at Families as Shocks.
    7. April 14.

      I talkef about how to extract information from life insurance data using these slides. We started discussing endogenous family formation. For this we used these slides.
    8. April 16.

      We talked about how to model endogenous family formation jointly with fertility. For this we used these slides.
    9. April 21.

      We talked about how mortality varies using these slides.
    10. April 23.

      We talked about how to measure what health does to people using these slides.
    11. April 28.

      Emily talked about Preventive vs. Curative Medicine using Serdar's research. We started talking about wages with a cursory description of the things that allows us to organize our thinking about changes in wages.
    12. April 30.

      Vegard presented "Allostatic load". Thanks Vegard . We talked about crime and self-employment as occupational choice. While doing it, we discussed the possiblity of having an endogenous earnings distribution via career choices.
    13. May 5.

      I talked about bankruptcy and default. In doing this, I developed the GEE of a problem without commitment.
    14. May 7.

      I continued talking about bankruptcy and default. I used these slides to get to the GEE of these problems. We discuss the extent of these tools. This finishes the course. I emphasized the need to know how to solve in the computer a simple OLG model with shocks.

    List of Homeworks Organized by batchs.

  • First Homework batch. Do it by April 8.

    1. A Ben Porath problem.

    2. 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 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). 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 Aiyagari problem.

    2. 2.A Pose and solve a model where agents live I periods, and have a Markov chain process for the endowment of efficiency units of labor (finite support).

      2.B Solve the same model where the process for labor is Markovian but has continuous, bounded support. Discuss the computational methods that you followed.

    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.
    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.

    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 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.