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• Cover
• Reference Tables
• Half Title
• Title
• Copyright
• Contents
• Preface
• Acknowledgments
• 1 Introduction
• The Labor Market
• Labor Economics: Some Basic Concepts
• Positive Economics
• The Models and Predictions of Positive Economics
• EXAMPLE 1.1 Positive Economics: What Does It Mean to “Understand” Behavior?
• Normative Economics
• EXAMPLE 1.2 Do We Need “Nudges” to Make the Right Decisions for Ourselves?
• Normative Economics and Government Policy
• Efficiency Versus Equity
• Plan of the Text
• Review Questions
• Problems
• Selected Readings
• APPENDIX 1A
• Statistical Testing of Labor Market Hypotheses
• A Univariate Test
• Multiple Regression Analysis
• The Problem of Omitted Variables
• Notes
• 2 Overview of the Labor Market
• The Labor Market: Definitions, Facts, and Trends
• The Labor Force and Unemployment
• EXAMPLE 2.1 The Unemployment Consequences of the Sudden COVID-19 Lockdown in March 2020
• Industries and Occupations: Adapting to Change
• The Earnings of Labor
• EXAMPLE 2.2 Real Wages Across Countries and Time: Big Macs per Hour Worked
• How the Labor Market Works
• The Demand for Labor
• The Supply of Labor
• The Determination of the Wage
• EXAMPLE 2.3 The Black Death and the Wages of Labor
• EXAMPLE 2.4 Prosecuting Workers Who Leave Their Employers
• Applications of the Theory
• Who Is Underpaid and Who Is Overpaid?
• Unemployment and Responses to Technological Change Across Countries
• EMPIRICAL STUDY 2.1 PAY LEVELS AND THE SUPPLY OF MILITARY OFFICERS: OBTAINING SAMPLE VARIATION FROM CROSS-SECTION DATA
• Review Questions
• Problems
• Notes
• Selected Readings
• 3 The Demand for Labor
• Profit Maximization
• Marginal Income From an Additional Unit of Input
• EXAMPLE 3.1 The Marginal Revenue Product of College Football Stars
• Marginal Expense of an Added Input
• The Short-Run Demand for Labor When Both Product and Labor Markets Are Competitive
• A Critical Assumption: Declining MPL
• From Profit Maximization to Labor Demand
• The Demand for Labor in Competitive Markets When Other Inputs Vary
• Labor Demand in the Long Run
• EXAMPLE 3.2 Coal Mining Wages and Capital Substitution
• More Than Two Inputs
• Labor Demand When the Product Market Is Not Competitive
• Maximizing Monopoly Profits
• Do Monopolies Pay Higher Wages?
• Policy Application: The Labor Market Effects of Employer Payroll Taxes and Wage Subsidies
• Who Bears the Burden of a Payroll Tax?
• Employment Subsidies as a Device to Help Unemployed People
• EMPIRICAL STUDY 3.1 DO WOMEN PAY FOR EMPLOYER-FUNDED MATERNITY BENEFITS? USING CROSS-SECTION DATA OVER TIME TO ANALYZE “DIFFERENCES IN DIFFERENCES”
• Review Questions
• Problems
• Notes
• Selected Readings
• APPENDIX 3A Graphical Derivation of a Firm’s Labor Demand Curve
• The Production Function
• Demand for Labor in the Short Run
• Demand for Labor in the Long Run
• Conditions for Cost Minimization
• The Substitution Effect
• The Scale Effect
• Notes
• 4 Labor Demand Elasticities
• The Own-Wage Elasticity of Demand
• The Hicks–Marshall Laws of Derived Demand
• Estimates of Own-Wage Labor Demand Elasticities
• Applying the Laws of Derived Demand: Inferential Analysis
• EXAMPLE 4.1 Why Are Union Wages So Different in Two Parts of the Trucking Industry?
• The Cross-Wage Elasticity of Demand
• Can the Laws of Derived Demand Be Applied to Cross-Elasticities?
• Estimates Relating to Cross-Elasticities
• Policy Application: Effects of Minimum-Wage Laws
• History and Description
• Employment Effects: Theoretical Analysis
• Employment Effects: Empirical Estimates
• EXAMPLE 4.2 The Employment Effects of the First U.S. Federal Minimum Wage
• Does the Minimum Wage Fight Poverty?
• “Living Wage” Laws
• Applying Concepts of Labor Demand Elasticity to the Issue of Technological Change
• EXAMPLE 4.3 Do Robots and Online Hiring Platforms Create or Destroy Jobs?
• EMPIRICAL STUDY 4.1 ESTIMATING THE LABOR DEMAND CURVE: TIME SERIES DATA AND COPING WITH “SIMULTANEITY”
• Review Questions
• Problems
• Notes
• Selected Readings
• 5 Frictions in the Labor Market
• Frictions on the Employee Side of the Market
• The Law of One Price
• Monopsonistic Labor Markets: A Definition
• Profit Maximization Under Monopsonistic Conditions
• EXAMPLE 5.1 Monopsony Power in Labor Markets: The Case of Antitrust in the High-Tech Industry
• How Do Monopsonistic Firms Respond to Shifts in the Supply Curve?
• Monopsonistic Conditions and the Employment Response to Minimum-Wage Legislation
• Job-Search Costs and Other Labor Market Outcomes
• Monopsonistic Conditions and the Relevance of the Competitive Model
• Frictions on the Employer Side of the Market
• Categories of Quasi-fixed Costs
• EXAMPLE 5.2 Does Employment-Protection Legislation Protect Workers?
• The Employment/Hours Trade-Off
• EXAMPLE 5.3 “Renting” Workers as a Way of Coping With Hiring Costs
• Training Investments
• The Training Decision of Employers
• The Types of Training
• EXAMPLE 5.4 General Training and Training Contracts
• Training and Post-Training Wage Increases
• Employer Training Investments and Recessionary Layoffs
• Hiring Investments
• The Use of Credentials
• Internal Labor Markets
• How Can the Employer Recoup Its Hiring Investments?
• EMPIRICAL STUDY 5.1 WHAT EXPLAINS WAGE DIFFERENCES FOR WORKERS WHO APPEAR SIMILAR? USING PANEL DATA TO DEAL WITH UNOBSERVED HETEROGENEITY
• Review Questions
• Problems
• Notes
• Selected Readings
• 6 Supply of Labor to the Economy: The Decision to Work
• Trends in Labor Force Participation and Hours of Work
• Labor Force Participation Rates
• Hours of Work
• EXAMPLE 6.1 Gig Work and the Choice of Working Hours
• A Theory of the Decision to Work
• Some Basic Concepts
• Analysis of the Labor/Leisure Choice
• EXAMPLE 6.2 The Labor Supply of New York City Taxi Drivers
• EXAMPLE 6.3 Do Large Inheritances Induce Labor Force Withdrawal?
• Empirical Findings on the Income and Substitution Effects
• EXAMPLE 6.4 Daily Labor Supply at the Ballpark
• EXAMPLE 6.5 Labor Supply Effects of Income Tax Cuts
• Policy Applications
• Budget Constraints With “Spikes”
• EXAMPLE 6.6 Staying Around One’s Kentucky Home: Workers’ Compensation Benefits and the Return to Work
• Programs With Net Wage Rates of Zero
• Subsidy Programs With Positive Net Wage Rates
• EXAMPLE 6.7 Wartime Food Requisitions and Agricultural Work Incentives
• EMPIRICAL STUDY 6.1 ESTIMATING THE INCOME EFFECT AMONG LOTTERY WINNERS: THE SEARCH FOR “EXOGENEITY”
• Review Questions
• Problems
• Notes
• Selected Readings
• 7 Labor Supply Household Production, the Family, and the Life Cycle
• A Labor Supply Model That Incorporates Household Production
• The Basic Model for an Individual: Similarities With the Labor-Leisure Model
• The Basic Model for an Individual: Some New Implications
• EXAMPLE 7.1 Obesity and the Household Production Model
• Joint Labor Supply Decisions in the Household
• Specialization of Function
• Do Both Partners Work for Pay?
• The Joint Decision and Interdependent Productivity at Home
• Labor Supply in Recessions: The “Discouraged” Versus the “Added” Worker
• EXAMPLE 7.2 Child Labor in Poor Countries
• Life Cycle Aspects of Labor Supply
• The Substitution Effect and When to Work Over a Lifetime
• EXAMPLE 7.3 How Does Labor Supply Respond to Housing Subsidies?
• The Choice of Retirement Age
• EXAMPLE 7.4 Inducing Earlier Retirement in the 1930s
• Policy Application: Childcare and Labor Supply
• Childcare Subsidies
• Child Support Assurance
• EMPIRICAL STUDY 7.1 THE EFFECTS OF WAGE INCREASES ON LABOR SUPPLY (AND SLEEP): TIME-USE DIARY DATA AND SAMPLE SELECTION BIAS
• Review Questions
• Problems
• Notes
• Selected Readings
• 8 Compensating Wage Differentials and Labor Markets
• Job Matching: The Role of Worker Preferences and Information
• Individual Choice and Its Outcomes
• Assumptions and Predictions
• Empirical Tests for Compensating Wage Differentials
• EXAMPLE 8.1 Working on the Railroad: Making a Bad Job Good
• Hedonic Wage Theory and the Risk of Injury
• Employee Considerations
• Employer Considerations
• The Matching of Employers and Employees
• EXAMPLE 8.2 Parenthood, Occupational Choice, and Risk
• EXAMPLE 8.3 Indentured Servitude and Compensating Differentials
• Normative Analysis: Occupational Safety and Health Regulation
• Hedonic Wage Theory and Employee Benefits
• Employee Preferences
• Employer Preferences
• The Joint Determination of Wages and Benefits
• Policy EXAMPLE: Employer-Provided Healthcare Benefits
• EMPIRICAL STUDY 8.1 HOW RISKY ARE ESTIMATES OF COMPENSATING WAGE DIFFERENTIALS FOR RISK? THE “ERRORS IN VARIABLES” PROBLEM
• Review Questions
• Problems
• Notes
• Selected Readings
• APPENDIX 8A Compensating Wage Differentials and Layoffs
• Unconstrained Choice of Work Hours
• Constrained Hours of Work
• The Effects of Uncertain Layoffs
• The Observed Wage–Layoff Relationship
• Notes
• 9 Investments in Human Capital Education and Training
• EXAMPLE 9.1 War and Human Capital
• Human Capital Investments: The Basic Model
• The Concept of Present Value
• Modeling the Human Capital Investment Decision
• The Demand for a College Education
• Weighing the Costs and Benefits of College
• Predictions of the Theory
• EXAMPLE 9.2 Can Language Affect Investment Behavior?
• EXAMPLE 9.3 Did the G.I. Bill Increase Educational Attainment for Returning World War II Veterans?
• EXAMPLE 9.4 When Investments in Human Capital Are Less Risky Than Investments in Physical Assets
• Market Responses to Changes in College Attendance
• Education, Earnings, and Post-Schooling Investments in Human Capital
• Average Earnings and Educational Level
• On-the-Job Training and the Concavity of Age–Earnings Profiles
• The Fanning Out of Age–Earnings Profiles
• Women and the Acquisition of Human Capital
• Is Education a Good Investment?
• Is Education a Good Investment for Individuals?
• EXAMPLE 9.5 Valuing a Human Asset: The Case of the Divorcing Doctor
• Is Education a Good Social Investment?
• EXAMPLE 9.6 The Socially Optimal Level of Educational Investment
• Is Public Sector Training a Good Social Investment?
• EMPIRICAL STUDY 9.1 ESTIMATING THE RETURNS TO EDUCATION BY USING A SAMPLE OF TWINS: COPING WITH THE PROBLEM OF UNOBSERVED DIFFERENCES IN ABILITY
• Review Questions
• Problems
• Notes
• Selected Readings
• APPENDIX 9A A “Cobweb” Model of Labor Market Adjustment
• An Example of “Cobweb” Adjustments
• Adaptive Expectations
• Rational Expectations
• Notes
• 10 Worker Mobility: Migration, Immigration, and Turnover
• The Determinants of Worker Mobility
• Geographic Mobility
• The Direction of Migratory Flows
• EXAMPLE 10.1 The Great Migration: U.S. Southern Black People Move North
• Personal Characteristics of Migrants
• The Role of Distance
• The Earnings Distribution in Sending Countries and International Migration
• EXAMPLE 10.2 Migration and One’s Time Horizon
• The Returns to International and Domestic Migration
• Policy Application: Restricting Immigration
• U.S. Immigration History
• Naive Views of Immigration
• An Analysis of the Gainers and Losers
• Do the Overall Gains From Immigration Exceed the Losses?
• EXAMPLE 10.3 Illegal Immigrants, Personal Discount Rates, and Crime
• EXAMPLE 10.4 Immigrants and Labor Mobility in the United States
• Employee Turnover
• Age Effects
• Wage Effects
• Effects of Employer Size
• Cyclical Effects
• Employer Location
• Is More Mobility Better?
• EMPIRICAL STUDY 10.1 DO POLITICAL REFUGEES INVEST MORE IN HUMAN CAPITAL THAN ECONOMIC IMMIGRANTS DO? THE USE OF SYNTHETIC COHORTS
• Review Questions
• Problems
• Notes
• Selected Readings
• 11 Pay and Productivity Wage Determination Within the Firm
• EXAMPLE 11.1 The Wide Range of Possible Productivities: The Case of the Factory that Could Not Cut Output
• Motivating Workers: An Overview of the Fundamentals
• The Employment Contract
• Coping With Information Asymmetries
• Motivating Workers
• EXAMPLE 11.2 Calorie Consumption and Type of Pay
• Motivating the Individual in a Group
• EXAMPLE 11.3 The Effects of Low Relative Pay on Worker Satisfaction
• Compensation Plans: Overview and Guide to the Rest of the Chapter
• Productivity and the Basis of Yearly Pay
• Employee Preferences
• Employer Considerations
• EXAMPLE 11.4 Poor Group Incentives Doom the Shakers
• Productivity and the Level of Pay
• Why Higher Pay Might Increase Worker Productivity
• Efficiency Wages
• EXAMPLE 11.5 Did Henry Ford Pay Efficiency Wages?
• Productivity and the Sequencing of Pay
• Underpayment Followed by Overpayment
• Promotion Tournaments
• EXAMPLE 11.6 The “Rat Race” in Law Firms
• Career Concerns and Productivity
• Applications of the Theory: Explaining Two Puzzles
• Why Do Earnings Increase With Job Tenure?
• Why Do Large Firms Pay More?
• EMPIRICAL STUDY 11.1 ARE WORKERS WILLING TO PAY FOR FAIRNESS? USING LABORATORY EXPERIMENTS TO STUDY ECONOMIC BEHAVIOR
• Review Questions
• Problems
• Notes
• Selected Readings
• 12 Gender, Race, and Ethnicity in the Labor Market
• Measured and Unmeasured Sources of Earnings Differences
• Earnings Differences by Gender
• EXAMPLE 12.1 Bias in the Selection of Musicians by Symphony Orchestras
• EXAMPLE 12.2 Does Gig Work Eliminate the Gender Pay Gap?
• Earnings Differences Between Black Americans and White Americans
• EXAMPLE 12.3 Race Discrimination Might “Strike” When Few Are Looking: The Case of Umpires in Major League Baseball
• Earnings Differences by Ethnicity
• Theories of Market Discrimination
• Personal-Prejudice Models: Employer Discrimination
• Personal-Prejudice Models: Customer Discrimination
• Personal-Prejudice Models: Employee Discrimination
• EXAMPLE 12.4 Fear and Lathing in the Michigan Furniture Industry
• Statistical Discrimination
• EXAMPLE 12.5 “Ban the Box” and Statistical Discrimination
• Noncompetitive Models of Discrimination
• A Final Word on the Theories of Discrimination
• Federal Programs to End Discrimination
• Equal Pay Act of 1963
• Title VII of the Civil Rights Act
• EXAMPLE 12.6 Comparable Worth and the University
• The Federal Contract Compliance Program
• Effectiveness of Federal Antidiscrimination Programs
• EMPIRICAL STUDY 12.1 CAN WE CATCH DISCRIMINATORS IN THE ACT? THE USE OF FIELD EXPERIMENTS IN IDENTIFYING LABOR MARKET DISCRIMINATION
• Review Questions
• Problems
• Notes
• Selected Readings
• APPENDIX 12A Estimating Comparable-Worth Earnings Gaps: An Application of Regression Analysis
• APPENDIX 12B Estimating the Gender Pay Gap in a Large International Company
• Notes
• 13 Unions and the Labor Market
• Union Structure and Membership
• International Comparisons of Unionism
• The Legal Structure of Unions in the United States
• Constraints on the Achievement of Union Objectives
• EXAMPLE 13.1 A Downward-Sloping Demand Curve for Football Players
• The Monopoly-Union Model
• The Efficient-Contracts Model
• The Activities and Tools of Collective Bargaining
• Union Membership: An Analysis of Demand and Supply
• EXAMPLE 13.2 The Effects of Deregulation on Trucking and Airlines
• Union Actions to Alter the Labor Demand Curve
• Bargaining and the Threat of Strikes
• EXAMPLE 13.3 Permanent Replacement of Strikers
• Bargaining in the Public Sector: The Threat of Arbitration
• The Effects of Unions
• The Theory of Union Wage Effects
• Evidence of Union Wage Effects
• Evidence of Union Total Compensation Effects
• The Effects of Unions on Employment
• The Effects of Unions on Productivity and Profits
• Normative Analyses of Unions
• EMPIRICAL STUDY 13.1 WHAT IS THE GAP BETWEEN UNION PAY AND NONUNION PAY? THE IMPORTANCE OF REPLICATION IN PRODUCING CREDIBLE ESTIMATES
• Review Questions
• Problems
• Notes
• Selected Readings
• APPENDIX 13A Arbitration and the Bargaining Contract Zone
• Notes
• 14 Unemployment
• A Stock-Flow Model of the Labor Market
• Duration of Unemployment
• Paths to Unemployment
• Rates of Flow Affect Unemployment Levels
• Frictional Unemployment
• The Theory of Job Search
• EXAMPLE 14.1 How Discerning Should Unemployed People Be in the Search for Work?
• Effects of Unemployment Insurance Benefits
• Structural Unemployment
• Occupational and Regional Unemployment Rate Differences
• EXAMPLE 14.2 Structural Unemployment as a Threat to Social Well-Being
• International Differences in Long-Term Unemployment
• Whether Efficiency Wages Cause Structural Unemployment
• Demand-Deficient (Cyclical) Unemployment
• Downward Wage Rigidity
• EXAMPLE 14.3 Nominal Wage Cuts for Construction Workers in the Great Recession
• EXAMPLE 14.4 Recessions and Worker Effort
• Financing U.S. Unemployment Compensation
• Seasonal Unemployment
• EXAMPLE 14.5 Unemployment Insurance and Seasonal Unemployment: A Historical Perspective
• When Do We Have Full Employment?
• Defining the Natural Rate of Unemployment
• Unemployment and Demographic Characteristics
• What Is the Natural Rate?
• Empirical Study 14.1 Do Re-employment Bonuses Reduce Unemployment? The Results of Social Experiments
• Review Questions
• Problems
• Notes
• Selected Readings
• 15 Inequality in Earnings
• Measuring Inequality
• Earnings Inequality Since 1980: Some Descriptive Data
• EXAMPLE 15.1 Differences in Earnings Inequality Across Developed Countries
• The Increased Returns of Higher Education
• EXAMPLE 15.2 Changes in the Premium to Education at the Beginning of the Twentieth Century
• Growth of Earnings Dispersion in Human-Capital Groups
• The Underlying Causes of Growing Inequality
• Changes in Supply
• Changes in Demand: Technological Change
• EXAMPLE 15.3 Will Machine Learning Increase Earnings Inequality?
• EXAMPLE 15.4 Are Early Childhood Programs a Vehicle for Reducing Earnings Inequality?
• Changes in Institutional Forces
• Is Inequality Inherited?
• EMPIRICAL STUDY 15.1 DO PARENTS’ EARNINGS DETERMINE THE EARNINGS OF THEIR CHILDREN? THE USE OF INTERGENERATIONAL DATA IN STUDYING ECONOMIC MOBILITY
• Review Questions
• Problems
• Notes
• Selected Readings
• APPENDIX 15A Lorenz Curves and Gini Coefficients
• Notes
• 16 The Labor Market Effects of International Trade and Production Sharing
• Why Does Trade Take Place?
• Trade Between Individuals and the Principle of Comparative Advantage
• The Incentives for Trade Across Different Countries
• EXAMPLE 16.1 The Growth Effects of the Openness to Trade: Japan’s Sudden Move to Openness in 1859
• Effects of Trade on the Demand for Labor
• Product Demand Shifts
• Shifts in the Supply of Alternative Factors of Production
• The Net Effect on Labor Demand
• EXAMPLE 16.2 Could a Quarter of U.S. Jobs Be Offshored? Might Your Future Job Be Among Them?
• Will Wages Converge Across Countries?
• Policy Issues
• Subsidizing Human-Capital Investments
• Income Support Programs
• Subsidized Employment
• How Narrowly Should We Target Compensation?
• EMPIRICAL STUDY 16.1 EVALUATING EUROPEAN ACTIVE LABOR MARKET POLICIES: THE USE OF META-ANALYSIS
• Summary
• Review Questions
• Problems
• Notes
• Selected Readings
• Answers to Odd-Numbered Review Questions and Problems
• Index