Labor Economics 2: The Economics of Inequality and Unemployment

Term: Fall 2011

Subject Code: GECO

Course Number: 6271

There are large differences in the incidence of low wages, earnings inequality, and unemployment across rich countries with relatively similar levels of GDP per capita. This course will describe and explore alternative explanations for these differences, focusing on the role played by the supply and demand for skills on the one hand, and by public policies and labor market institutions on the other. It will consist of three parts: 1) low wages and earnings inequality, 2) unemployment and labor force participation, and 3) the interaction between the two: is the conventional wisdom correct that there is a tradeoff? Parts 1 and 2 will begin with a careful treatment of measurement and description of the differences, followed by an assessment of alternative theoretical explanations, and finally by an assessment of these explanations based on the empirical evidence. The overall objective is to learn about the nature of these labor market outcomes in rich countries and to compare the U.S. model to alternative labor market regimes, or "capitalisms". There is no prerequisite, but the readings will come from the professional literature, so some exposure to economics and quantitative methods is strongly recommended.  Cross-listed as MEFI 6068