Course Name: Labor Economics (Arbejdsmarkedspolitik)
Planned to be offered: Unknown
Chronology: M.Sc. course, each spring
ECTS: 7½
Teacher: Karsten Albæk, associate professor, Department of Economics, University of Copenhagen. e-mail: karsten.albaek@econ.ku.dk
Time and Place: Tuesday 10-12 all weeks in CSS 18.01.11, Thursday 10-12 uneven weeks in CSS 22.0.19

Academic Aims
The course in labor economics is supposed to make the student understand and analyze economic problems in relation to how the labor market functions. Of particular relevance are subjects of importance for economic policy in the area. Furthermore, the course aims at provide understanding in the principles of how to analyze data in connection with empirical investigations in the field. The student is expected to independently to analyze the consequences of economic policy in the following fields:
(1) What determines the supply of labor. Both the case if labor is supplied or not, and if yes, how many ours that are supplied. After the course, the student is expected to be able trace the consequences of changes in the incentives to supply labor, e.g. tax rates.
(2) To understand and analyze the consequences of self selection in connection with empirical analysis of the labor market.
(3) To discuss and analyze the determinants of demand for labor and the concepts, which have been developed to understand demand for labor. The student should be able to apply the concepts in the analysis of e.g. immigration.
(4) Students should be able to analyze the decision of individuals to undertake investment in human capital. Furthermore, the students should be able to undertake methodological considerations in connection with empirical investigations of the return to investment in human capital.
(5) To understand and apply the line of thought in models on non-competitive wage formation as in models of trade unions and efficiency wage models.
(6) To analyze the transition from unemployment to employment as an optimal stopping problem. Furthermore tie aim is to be able to analyze the methodological line of thought in empirical analysis of the transition from unemployment to employment. She student should also be able to address the role of the demand side in search models.
(7) To analyze the consequences of economic policy in the form of employment protection (“flexicurity”).
To achieve the maximum grade, students must excel in all of the listed areas.

Course Content
The content of the course includes labor supply, labor demand and the formation of wages and income. An integral part of the course is wage formation, where topics like trade unions and efficiency wages are covered. The point of departure in the analysis of unemployment is search theory. It is covered by including partial search theory, two sided search theory and general equilibrium theory. Special topics are also covered such as employment protection and immigration. Furthermore, in order to illustrate application of theory, empirical contributions are covered.

Syllabus
I. LABOR SUPPLY
Fallon, P. and D. Verry. 1988. The Economics of Labor Markets. Ox¬ford. Ch. 1-2. p. 1-80 (80 p.)
II. LABOR DEMAND
Hamermesh, Daniel.1993. Labor Demand. Ch. 2. p.17-60, plus Tables in Ch. 3 (64 p.)
Johnson, George E. 1997. Changes in Earnings Inequality: The Role of Demand Shifts. Journal of Economic Perspectives, vol. 11, p. 41-54 (14 p.)
III. WAGES AND INCOME
Fallon and Verry Ch. 5. p. 134-169 (36 p.)
Becker, Gary. 1964. Human Capital. Ch. 2. p. 7-36 (30 p.)
IV. TRADE UNIONS
Cahuc and Zylberberg. 2004. Labor Economics. Ch. 7., section 1, pp. 369-380, and section 3, pp. pp. 393-405
V. UNEMPLOYMENT
Contract theory:
Feldstein, Martin. 1976. Temporary layoffs in the theory of unemployment. Journal of Political Economy, 84, p. 937-956. (29 p.)
The search Approach:
Mortensen, Dale T. 1986. Job search and labor market analy¬sis. I O. Ashenfelter and R. Layard (eds.): Handbook of Labor Economics, vol. II, p. 849-919 (70 p.)
Lancaster, Tony. 1979. Econometric Methods for the Duration of Unemployment. Econometrica 47 (4), p. 939-956 (17 p.)
Pissarides, Christopher A. 2000. Equilibrium Unemployment Theory. Second edition, p. 3-36 (34 p.)
Cahuc and Zylberberg. 2004. Labor Economics. Ch. 3, section 2.1, An Equilibrium Search Model, pp. 126-133, and section 3.2, Main Results, pp. 155-170 (24 p.)
Efficiency wages:
Layard, Richard, S. Nickell, and R. Jackman. 1991. Unemploy¬ment, Ch. 3 (Efficiency wages), p. 150-172 (22 p.)
Employment protection (flexicurity):
Bertola, Guiseppe. 1999. Microeconomic perspectives on aggregate labor markets. In O. Ashenfelter and D. Card (eds.): Handbook of Labor Economics, vol. 3C, p. 2985-3028 (42 p.)
Albæk, Karsten, Marc van Audenrode and Martin Browning. 2002. Employment Protection and the Consequences for Displaced Workers. A Comparison of Belgium and Denmark. In Peter Kuhn (ed.): Losing Work, Moving On. International Perspectives on Worker Displacement, p. 471-511 (40 p.)
VI. EVIDENCE
Nickell, Steven. 1997. Unemployment and Labor Market Rigidities: Europe versus North America. Journal of Economic Perspectives, vol. 11, No. 3, pp. 55-74 (19 p.)
VII. EVALUATION
Cahuc and Zylberberg. 2004. Labor Economics. Ch. 11, section 3, The Evaluation of Active Labor Market Policies, pp. 668-687, and pp. 707-712 (20 p.)
VIII. IMMIGRATION
Maddala, G.S. 1983. Limited-dependent and qualitative variables in econometrics. Cambridge. p. 257-67, p. 365-67 (13 p.).
Borjas, George J. 1999. The Economic Analysis of Immigration. In O. Ashenfelter and D. Card (eds.): Handbook of Labor Economics, vol. 3A, p. 1697-1760 (64 p.)
In addition: Various minor notes.

Language: English
Prerequisites:
Bachelor degree in economics
Teaching and Work Forms:
Teaching is mostly lectures. The language is English.
Formal Requirements:
No formal requirements.
Examination:
Four hours closed book examination. The examination question in normally policy related and the students are required to apply the theory on the policy question at hand. The exam can be answered in Danish or in English.

F-Labour Economics (english) - Postponed