Labor Market Outcomes
Instructor: Robert Shimer (University of Chicago)
The objective of this course is to explore the determination of labor market outcomes, including employment, hours worked, unemployment, and wages. The course will focus on two main issues: the decline in employment and hours worked in many continental European countries relative to many Anglo-Saxon countries during the last four decades; and the volatility of employment, hours worked, and unemployment at business cycle frequencies. It will pay particular attention to whether one can usefully think about the labor market as being in equilibrium, with workers choosing how much labor to supply, and firms choosing how much labor to demand, at the market wage.
To answer this question, it is important to know how elastic is labor supply, and so the course will spend some time studying recent empirical evidence on this question. The evidence suggests that one can usefully think about the labor market as clearing in the long-run, but not at business cycle frequencies. Search theoretic models of the labor market offer one possible explanation for why the labor market does not clear at each instant. But whether this explanation is consistent with facts about the business cycle depends on how wages are set.
Course Outline
- Labor supply: Dynamic models; intensive versus extensive margin; individual versus household; long-run versus short-run.
- Search theoretic models of unemployment, vacancies, worker flows, and job flows.
- Alternative models of wage setting: bargaining; efficiency wages; rigid wages.
Robert Shimer is the Alvin H. Baum Professor in Economics at the University of Chicago. Prior to joining the Chicago faculty in 2003, he received his PhD at the Massachusetts Institute of Technology and taught at Princeton University. He is a consultant at the Federal Reserve Bank of Chicago, a Research Associate in the National Bureau of Economic Research, and a Fellow of the Econometric Society. He is a co-chair of the NBER Economic Fluctuations and Growth “Macro Perspectives” group, and has served as editor of the
Journal of Political Economy since 2004.
Prof. Shimer’s research lies in the intersection between macroeconomics and labor economics. He has focused on search frictions and on the mismatch between workers’ human capital and geographic location and the skill requirements and location of available jobs. He is the author of the book Labor Markets and Business Cycles and has published in many leading journals, including the American Economic Review, Econometrica, the Journal of Political Economy, the Quarterly Journal of Economics, the Review of Economic Studies, the Journal of Economic Literature, and the American Economic Journal: Macroeconomics.
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