Economics 533 - Economics of Human Capital

Economics 533 - Economics of Human Capital

Economics 533 - Economics of Human Capital

Spring 2007

Philip Trostel

240 Stevens Hall

581-1822

office hours: TT 3:15 – 4:30

Course Description

This course examines what is arguably the most important input in modern economies – human capital. The theory of human capital production is examined as well as theories of how it contributes to economic prosperity at both the individual and societal levels. The implications of human capital for labor markets, economic growth, and public policy are also explored. Because labor economics is more empirically-oriented than most other areas in economics, much of the emphasis in this course is on empirical evidence. Also, because most human capital is produced through publicly provided education, there is an emphasis on educational policies as well.

Course Prerequisites

Intermediate Microeconomics (ECO 420) or higher

Introductory Econometrics (ECO 485) or higher

Introductory Mathematical Economics (ECO 480) or equivalent

Some Potentially Useful References

There is no assigned textbook for this course, but the following are good general references.

Ashenfelter & Card, Handbook of Labor Economics, vols. 3A, 3B & 3C, 1999.

Ashenfelter & Layard, Handbook of Labor Economics, vols. 1 & 2, 1986.

Becker, Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education, 3rd ed., 1993.

Borjas, Labor Economics, 3rd ed., 2004.

Ehrenberg, Modern Labor Economics: Theory and Public Policy, 9th ed., 2005.

Killingsworth, Labor Supply, 1983.

Coursework

AssignmentWeightDate

Article Presentation5%TBA, March 27th – April 10th

Project Presentation5%TBA, April 17th – May 1st

Midterm Exam25%Thursday, February 22nd

Final Exam25%Thursday, May 3rd

Research Proposal10%Tuesday, February 27th

Research Paper30%Friday, May 11th, 12:00

  • Each student will give two 30- to 40-minute presentations in class. The first presentation will be on an article assigned from the reading list, or an article jointly selected by the student and the professor. The second presentation will be on the student’s research project.
  • There will be two equally-weighted exams. The final exam is not cumulative.
  • Almost half of the course grade is based on the student’s research project. Students are strongly encouraged to discuss their research topics with me. I would be happy to work closely with students on their projects. Moreover, I have several research projects that I could collaborate on with students.

To encourage steady progress there is an early intermediate deadline. The proposal should present a specific and detailed research idea and plan, as well as references and some literature review. It should probably be about 1,000 to 1,500 words of text (i.e., not including front-cover material, references, tables, etc.). The final version should probably be no less than 2,000 and no more than 5,000 words of text.

These assignments may be submitted electronically or in paper. In either case, the proposal is due by the beginning of the class period. The quality of the writing matters. Late work will be penalized. Plagiarism (to pass off someone else’s work as one’s own) is grounds for a failing grade.

Students have a great deal of latitude on the topic and type of research project. The topic just needs to be related to human capital in some way. The paper should probably be at least partly empirical, although it does not have to be.

  • A review of the literature is acceptable, but it should be thorough. A thorough literature review with some original thought (e.g., identifies problems and/or gaps in the literature) will get a high grade.
  • A policy brief is acceptable, but it should have some substance to it. A well-written policy brief with real substance will receive a high mark.
  • A reproduction and extension of earlier research is also acceptable. A well thought-out and carefully-done extension of previous work will get a high mark.
  • An original research project is obviously acceptable. Well-done original research may have the highest potential for a high grade.

The ultimate goal of the research project is some kind of submission. For example, an article could be submitted to a refereed journal, although this would be extremely ambitious for a one-semester project. An article could be submitted to a policy journal such as the Maine Policy Review. An op-ed (with a lot of substance to support it) could be submitted to a newspaper or magazine. Or perhaps a grant proposal could be submitted to a funding agency.

Course Outline and Reading List

1.Labor Supply

  1. Static Labor Supply
  2. Family Labor Supply
  3. Dynamic Labor Supply
  4. Estimation

Pencavel, “Labor Supply of Men: A Survey,” in Handbook of Labor Economics, vol. 1, 1986.

Killingsworth & Heckman, “Female Labor Supply: A Survey,” in Handbook of Labor Economics, vol. 1, 1986.

Heckman, “What Has Been Learned About Labor Supply in the Past Twenty Years?” AER, May 1993.

Blundell & MaCurdy, “Labor Supply: A Review of Alternative Approaches,” in Handbook of Labor Economics, vol. 3A, 1999.

2.Human Capital

  1. Human Capital Theory
  2. On-the-Job Training
  3. Returns to Scale & Economic Growth
  4. Preferences
  5. Fiscal Policies

Weiss, “The Determination of Life Cycle Earnings: A Survey,” in Handbook of Labor Economics, vol. 1, 1986.

Mankiw, “The Growth of Nations,” Brookings Papers on Economic Activity, 1995.

Topel, “Labor Markets and Economic Growth,” in Handbook of Labor Economics, vol. 3C, 1999.

Trostel & Walker, “Education and Work,” Education Economics, December 2006.

Trostel, “The Effect of Taxation on Human Capital,” JPE, April 1993.

Heckman, Lochner, & Taber, “Tax Policy and Human-Capital Formation,” AER, May 1998.

Trostel, "Should Education Be Publicly Provided?" Bulletin of Economic Research, October 2002.

Heckman, Lochner, & Taber, “General-Equilibrium Treatment Effects: A Study of Tuition Policy,” AER, May 1998.

Cossa, Heckman, & Lochner, “Understanding the Incentive Effects of the EITC on Skill Formation,” working paper, 2000.

3.Rate of Return to Education

  1. Basic Approaches
  2. Control for Experience
  3. Nonlinearity
  4. Ability Bias
  5. Identification of Causal Effects

Psacharopoulos & Patrinos, “Human Capital and Rates of Return” in Johnes & Johnes, International Handbook on the Economics of Education, 2004.

Trostel, “Returns to Scale in Producing Human Capital from Schooling,” Oxford Economic Papers, July 2004.

Card, “The Causal Effect of Education on Earnings,” in Handbook of Labor Economics, vol. 3A, 1999.

Angrist & Krueger, “Empirical Strategies in Labor Economics,” in Handbook of Labor Economics, vol. 3A, 1999.

Heckman, Lochner, & Todd, “Earnings Functions, Rates of Return and Treatment Effects: The Mincer Equation and Beyond,” in Handbook of Economics of Education, 2006.

4.Sheepskin Effects

  1. Sorting
  2. Criticism & Counter-Criticism
  3. Evidence

Weiss, “Human Capital vs. Signalling Explanations of Wages,” JEP, Fall 1995.

Groot & Oosterbeek, “Earnings Effects of Different Components of Schooling: Human Capital versus Screening,” REStat, 1994.

Trostel & Walker, “Sheepskin Effects in Work Behaviour,” Applied Economics, 2004.

5.Topics in Higher Education Policy

  1. Externalities
  2. Migration
  3. Consumers as Inputs

D.Demand for Higher Education

McMahon, “The Social and External Benefits of Education” in Johnes & Johnes, International Handbook on the Economics of Education, 2004.

Topel, “The Private and Social Values of Education” in Federal Reserve Bank of Cleveland, Education and Economic Development, 2004.

Trostel, “Fiscal Benefits from Public Investment in Higher Education,” working paper, 2007.

Strathman, “Migration, Benefit Spillovers and State Support of Higher Education,” Urban Studies, June 1994.

Bound, Groen, Kézdi, & Turner, “Trade in University Training: Cross-State Variation in the Production and Use of College-Educated Labor,” Journal of Econometrics, July 2004.

Trostel, “The Impact of New College Graduates on Intrastate Labor Markets” working paper, 2007.

Winston, “Subsidies, Hierarchy and Peers: The Awkward Economics of Higher Education,” JEP, Winter 1999.

Dynarski, “The Behavioral and Distributional Implications of Aid for College,” AER, May 2002.

1

Top View