Graduate Labor

Joint course with Franck Malherbet. For the first part of the course, please check website

The Structure of the Course:

• • A graduate course for people willing to invest and work …

  • A European perspective inspired by the reasons for (French) unemployment rather than the reasons for inequality, see David Autor (below), 

  • In which firms play the central role, in a landscape less focused on technology, more on trade and competition

 Lessons from the History of the Field:

• •  Supply and Demand matter

  • To assess that they do, labor economists went for more and more complex data …

  •  … and more diverse and rich methodologies...

  • ...to get ever closer to the mechanisms at stake

  • And control for/take account of heterogeneity from two natures:

    • Econometric

    • Economic

  • With a recent push for the former (of the unobserved sort) on the identification front

  • With a recent push for the latter on the heterogeneous-firm theory front

 What has convinced us that heterogeneity not only matters but is first-order? Why do we believe that it is essential to account for it in order to understand the way labor markets function? 

At least for me, the initial shock was Davis and Haltiwanger, 1992, where they study Job Creation and Job Destruction. It led me to re-explore with French data allowing us to measure workers’ flows rather than gross flows. Heterogeneity is also massive. Viewed from a reverse angle (heterogeneity means that we cannot explain flows with observed variables), nothing explains JC and JD, but the age of the firm. Hence, looking at young firms and how they differ from others is important. This is the topic of the First Lecture …

One thing is sure: if age of the firm really matters economically, then entry matters, then understanding the role of competition is central. Indeed, competition is a port of entry to study both wages and employment … This is the topic of the Second Lecture. 

Trade is another force that should affect labor markets. The Third Lecture will present some evidence that trade indeed matters. 

Once we agree on the forces that shape labor markets, we spend some times on the tools – data, concepts, techniques – that are needed to understand labor markets in the 21st century. 

 We first start by examining LEED (Longitudinal Employee Employer Data). To exemplify their use and how they solve long-standing problems in labor, we use the “Inter-Industry Wage Differentials” classic puzzle. Then, we present the models, techniques, and results for LEED. These themes are presented within the Fourth and Fifth Lectures. 

Another useful concept that should be used throughout labor market analysis are Tasks. Since Autor, Levy, and Murnane, QJE, 2003, seminal work, tasks’ analysis should have superseded the use of occupations and should be constituting the main building block when studying changes on the labor market and the associated content of jobs. We will present some models useful to think about tasks and production in the Sixth Lecture. Tasks will also be present in our Seventh Lecture on Trade and the Labor Market, in which we will present a GE model of trade and tasks, using the “heterogeneous firm” framework (see above), structurally estimated using French data. This model “endogenizes” the emergence of a firm-to-firm Network and captures Granularity in an economy. Granularity and Heterogeneity are two buzzwords of recent economic research, both from a theory and from an empirical viewpoint. In addition, using very recent work on Germany, the effects of (local) outsourcing on wages and employment are also presented. Networks is another buzzword. In our Eighth Lecture – the final but also very dense -- we present recent empirical work in which labor market analysis relies on the use of Networks, using some recently developed techniques.

And now, for the content of the different lectures.

Lecture 1: Job Creation, Job Destruction

• • • • Davis and Haltiwanger, 1992, “Gross Job Creation, Gross Job Destruction, and Employment Reallocation,” QJE

      • Abowd, Corbel, and Kramarz, 1999, “The Entry and Exit of Workers and the Growth of Employment: An Analysis of French Establishments,” ReStat  

      • Davis, Faberman, and Haltiwanger, JEP

      • Ouimet and Zaruskie, 2014, “Who Works for Startups?” JFE

      • Nimier-David, 2018, Tables for France on “Age of Workers and Age of the Firm”

             Slides

Lecture 2: Product Market Competition and the Labor Market

• • • • Abowd and Lemieux, 1993, “The Effect of Product Market Competition on Collective Bargaining Agreements,” QJE 

      • Bertrand and Kramarz, 2002, “Does Product Market Regulation Hinder Job Creation?” QJE

      • Basker, 2005, “Labor Market Effects of Wal-Mart Expansion,” ReStat

             Slides

Lecture 3: Trade and the Labor Market

• • • • Autor, Dorn, Hanson, and Song, 2014, “Trade Adjustment: Worker-Level Evidence,” QJE

             Slides

Lecture 4: Inter-Industry Wage Differentials: From Cross-Sectional Data Sources to LEED

• • • • Krueger and Summers, 1987, “Reflections on the Inter-Industry Wage Structure,” in Kevin Lang and Jonathan Leonard (eds.), Unemployment and the Structure of Labor Markets (London: Basil Blackwell Press, 1987), 17-47 

      • Krueger and Summers, 1988, “Efficiency Wages and the Inter-Industry Wage Structure,” Eca

      • Gibbons and Katz, 1992, “Does Unmeasured Ability Explain Inter-Industry Wage Differences?” ReStud

      • Abowd, Kramarz, and Margolis, 1999, “High-Wage Workers and High-Wage Firms,” Eca 

      • Abowd, Creecy, Kramarz, 2002, “Computing Person and Firm Effects using LEED,” unpublished

      • Abowd, Kramarz, Lengermann, McKinney, Roux, 2015, “Persistent Inter-Industry Wage Differences: Rent-Sharing and Opportunity Costs,” IZAJoLE 

            Slides

Lecture 5: New Results from LEED

• • • • Card, Heining, and Kline, 2013, “Workplace Heterogeneity and the Rise of West German Wage Inequality,” QJE

      • Card, Cardoso, and Kline, 2016, “Bargaining, Sorting, and the Gender Wage Gap: Quantifying the Impact of Firms on the Relative Pay of Women,” QJE 

           Slides

Lecture 6: Tasks

• • • • Acemoglu and Autor, 2011, “Skills, Tasks, and Technologies,” Handbook of Labor Economics, North-Holland

          Slides

Lecture 7: Trade and the Labor Market: a structural model of firms in trade

• • • • Eaton, Kortum, and Kramarz, 2022, “Firm-to-Firm Trade: Imports, Exports, and the Labor Market,” NBER working paper

      • Goldschmidt and Schmieder, 2018, “The Rise of Domestic Outsourcing and the Evolution of the German Wage Structure,” QJE

          Slides Gold & Schm 

          Slides EKKII

(Lecture 8): Networks (not in the Lectures in 2022-2023)

• • • • Kramarz and Thesmar, 2013, “Social Networks in the Boardroom,” JEEA

      • Kramarz and Skans, 2014, “When Strong Ties are Strong,” ReStud

      • Schmutte, 2015, “Job Referrals Networks and the Determination of Earnings in Local Labor Markets,” JoLE

      • Eliasson, Hensvik, Kramarz, and Skans, 2022, “Social Connections and the Sorting of Workers to Firms,” Journal of Econometrics

          Slides

Lecture 8: Superstar Firms, the Falling Labor Share, and Related Topics (in the Lectures in 2022-2023)

• Song et al., 2019, "Firming Up Inequality," QJE

• Autor et al., 2020, "The Fall of the Labor Share and the Rise of Superstar Firms," QJE

• Kehrig and Vincent, 2021, "The Micro-Level Anatomy of the Labor Share Decline," QJE

• De Loecker, Eeckhout, and Unger, 2020, "The Rise of Market Power and the Macroeconomic Implications," QJE

• Rossi-Hansberg, Sarte, and Trachter, 2021, "Diverging Trends in National and Local Concentration," NBER

• Hershbein and Kahn, 2018, "Do Recessions Accelerate Routine-Biased Technical Change," AER

         Slides Song et al.

         Slides De Loecker et al.

         Slides Kehring & Vincent

Additional Required Readings:

• • On skills and inequality:

    • • Katz and Murphy, QJE, 1992

      • Card and Lemieux, QJE, 2001

  • On trade, the basic Ricardian model:

    • • Eaton and Kortum, Eca, 2002

      • Eaton and Kortum, JEP, 2012

  • On Tasks:

    • • Autor, Levy, and Murnane, QJE, 2003

Other material on the web:

 https://economics.mit.edu/faculty/dautor/courses

https://ocw.mit.edu/courses/economics/14-662-labor-economics-ii-spring-2015/lecture-notes/

Joint course with Franck Malherbet. For the first part of the course, please check website

The Structure of the Course:

• • A graduate course for people willing to invest and work …

  • A European perspective inspired by the reasons for (French) unemployment rather than the reasons for inequality, see David Autor (below), 

  • In which firms play the central role, in a landscape less focused on technology, more on trade and competition

 Lessons from the History of the Field:

• •  Supply and Demand matter

  • To assess that they do, labor economists went for more and more complex data …

  •  … and more diverse and rich methodologies...

  • ...to get ever closer to the mechanisms at stake

  • And control for/take account of heterogeneity from two natures:

    • Econometric

    • Economic

  • With a recent push for the former (of the unobserved sort) on the identification front

  • With a recent push for the latter on the heterogeneous-firm theory front

 What has convinced us that heterogeneity not only matters but is first-order? Why do we believe that it is essential to account for it in order to understand the way labor markets function? 

At least for me, the initial shock was Davis and Haltiwanger, 1992, where they study Job Creation and Job Destruction. It led me to re-explore with French data allowing us to measure workers’ flows rather than gross flows. Heterogeneity is also massive. Viewed from a reverse angle (heterogeneity means that we cannot explain flows with observed variables), nothing explains JC and JD, but the age of the firm. Hence, looking at young firms and how they differ from others is important. This is the topic of the First Lecture …

One thing is sure: if age of the firm really matters economically, then entry matters, then understanding the role of competition is central. Indeed, competition is a port of entry to study both wages and employment … This is the topic of the Second Lecture. 

Trade is another force that should affect labor markets. The Third Lecture will present some evidence that trade indeed matters. 

Once we agree on the forces that shape labor markets, we spend some times on the tools – data, concepts, techniques – that are needed to understand labor markets in the 21st century. 

 We first start by examining LEED (Longitudinal Employee Employer Data). To exemplify their use and how they solve long-standing problems in labor, we use the “Inter-Industry Wage Differentials” classic puzzle. Then, we present the models, techniques, and results for LEED. These themes are presented within the Fourth and Fifth Lectures. 

Another useful concept that should be used throughout labor market analysis are Tasks. Since Autor, Levy, and Murnane, QJE, 2003, seminal work, tasks’ analysis should have superseded the use of occupations and should be constituting the main building block when studying changes on the labor market and the associated content of jobs. We will present some models useful to think about tasks and production in the Sixth Lecture. Tasks will also be present in our Seventh Lecture on Trade and the Labor Market, in which we will present a GE model of trade and tasks, using the “heterogeneous firm” framework (see above), structurally estimated using French data. This model “endogenizes” the emergence of a firm-to-firm Network and captures Granularity in an economy. Granularity and Heterogeneity are two buzzwords of recent economic research, both from a theory and from an empirical viewpoint. In addition, using very recent work on Germany, the effects of (local) outsourcing on wages and employment are also presented. Networks is another buzzword. In our Eighth Lecture – the final but also very dense -- we present recent empirical work in which labor market analysis relies on the use of Networks, using some recently developed techniques.

And now, for the content of the different lectures.

Lecture 1: Job Creation, Job Destruction

• • • • Davis and Haltiwanger, 1992, “Gross Job Creation, Gross Job Destruction, and Employment Reallocation,” QJE

      • Abowd, Corbel, and Kramarz, 1999, “The Entry and Exit of Workers and the Growth of Employment: An Analysis of French Establishments,” ReStat  

      • Davis, Faberman, and Haltiwanger, JEP

      • Ouimet and Zaruskie, 2014, “Who Works for Startups?” JFE

      • Nimier-David, 2018, Tables for France on “Age of Workers and Age of the Firm”

             Slides

Lecture 2: Product Market Competition and the Labor Market

• • • • Abowd and Lemieux, 1993, “The Effect of Product Market Competition on Collective Bargaining Agreements,” QJE 

      • Bertrand and Kramarz, 2002, “Does Product Market Regulation Hinder Job Creation?” QJE

      • Basker, 2005, “Labor Market Effects of Wal-Mart Expansion,” ReStat

             Slides

Lecture 3: Trade and the Labor Market

• • • • Autor, Dorn, Hanson, and Song, 2014, “Trade Adjustment: Worker-Level Evidence,” QJE

             Slides

Lecture 4: Inter-Industry Wage Differentials: From Cross-Sectional Data Sources to LEED

• • • • Krueger and Summers, 1987, “Reflections on the Inter-Industry Wage Structure,” in Kevin Lang and Jonathan Leonard (eds.), Unemployment and the Structure of Labor Markets (London: Basil Blackwell Press, 1987), 17-47 

      • Krueger and Summers, 1988, “Efficiency Wages and the Inter-Industry Wage Structure,” Eca

      • Gibbons and Katz, 1992, “Does Unmeasured Ability Explain Inter-Industry Wage Differences?” ReStud

      • Abowd, Kramarz, and Margolis, 1999, “High-Wage Workers and High-Wage Firms,” Eca 

      • Abowd, Creecy, Kramarz, 2002, “Computing Person and Firm Effects using LEED,” unpublished

      • Abowd, Kramarz, Lengermann, McKinney, Roux, 2015, “Persistent Inter-Industry Wage Differences: Rent-Sharing and Opportunity Costs,” IZAJoLE 

            Slides

Lecture 5: New Results from LEED

• • • • Card, Heining, and Kline, 2013, “Workplace Heterogeneity and the Rise of West German Wage Inequality,” QJE

      • Card, Cardoso, and Kline, 2016, “Bargaining, Sorting, and the Gender Wage Gap: Quantifying the Impact of Firms on the Relative Pay of Women,” QJE 

           Slides

Lecture 6: Tasks

• • • • Acemoglu and Autor, 2011, “Skills, Tasks, and Technologies,” Handbook of Labor Economics, North-Holland

          Slides

Lecture 7: Trade and the Labor Market: a structural model of firms in trade

• • • • Eaton, Kortum, and Kramarz, 2022, “Firm-to-Firm Trade: Imports, Exports, and the Labor Market,” NBER working paper

      • Goldschmidt and Schmieder, 2018, “The Rise of Domestic Outsourcing and the Evolution of the German Wage Structure,” QJE

          Slides Gold & Schm 

          Slides EKKII

(Lecture 8): Networks (not in the Lectures in 2022-2023)

• • • • Kramarz and Thesmar, 2013, “Social Networks in the Boardroom,” JEEA

      • Kramarz and Skans, 2014, “When Strong Ties are Strong,” ReStud

      • Schmutte, 2015, “Job Referrals Networks and the Determination of Earnings in Local Labor Markets,” JoLE

      • Eliasson, Hensvik, Kramarz, and Skans, 2022, “Social Connections and the Sorting of Workers to Firms,” Journal of Econometrics

          Slides

Lecture 8: Superstar Firms, the Falling Labor Share, and Related Topics (in the Lectures in 2022-2023)

• Song et al., 2019, "Firming Up Inequality," QJE

• Autor et al., 2020, "The Fall of the Labor Share and the Rise of Superstar Firms," QJE

• Kehrig and Vincent, 2021, "The Micro-Level Anatomy of the Labor Share Decline," QJE

• De Loecker, Eeckhout, and Unger, 2020, "The Rise of Market Power and the Macroeconomic Implications," QJE

• Rossi-Hansberg, Sarte, and Trachter, 2021, "Diverging Trends in National and Local Concentration," NBER

• Hershbein and Kahn, 2018, "Do Recessions Accelerate Routine-Biased Technical Change," AER

         Slides Song et al.

         Slides De Loecker et al.

         Slides Kehring & Vincent

Additional Required Readings:

• • On skills and inequality:

    • • Katz and Murphy, QJE, 1992

      • Card and Lemieux, QJE, 2001

  • On trade, the basic Ricardian model:

    • • Eaton and Kortum, Eca, 2002

      • Eaton and Kortum, JEP, 2012

  • On Tasks:

    • • Autor, Levy, and Murnane, QJE, 2003

Other material on the web:

 https://economics.mit.edu/faculty/dautor/courses

https://ocw.mit.edu/courses/economics/14-662-labor-economics-ii-spring-2015/lecture-notes/