Labor Economics
(Fall 2012)

prof.: Sekyu Choi (

we meet: Tuesday at 11:30am and Thursday 12pm
office hours: Tuesday, 5 to 7pm or by appointment (email)


I will use this webpage to keep track of class discussion, give announcements and post the problem sets. Also, ocassional 'extra' readings will be posted here.

Problem Sets
[First problem set] Due date, Oct. 2nd.
[Second problem set] Due date, Oct. 18th.
[Third problem set] Due date, Nov. 1st. (some excellent notes on solving the computational part here.)
[Fourth problem set] Due date, Nov. 20th. (No presentation, everyone turns in their answers).
[Fifth problem set] Due date, Nov. 29th.

A couple of words on the final project:
Due date is midnight, December 21st, 2012.

For the project, Write an original research proposal. This proposal has to have as a minimum:
(i) a coherent description of the research question
(ii) a thorough literature review (to see where in the literature this research question fits)
(iii) a serious discussion of which data/model is better suited to answer the question OR the setup of a new model (if the case). You don't have to solve the model/present empirical results. It suffices that you know what would be the limitations of your approach.

Please, send me a pdf file with the write up before the due date. Name that pdf with your last name (e.g. choi.pdf) and email it to me with subject "LABOR PROJECT 2012".


Class Log
21. Thursday, Nov. 29th.: Guillem presented the last problem set. We discussed ideas and applications of the search models in other areas (geographic mobility, households versus individuals, occupations, etc.). The end.

20. Tuesday, Nov. 27th.: We finished the discussion of the MP (1994) model and talked briefly about directed/competitive search models. We talked about how to think of dynamics of unemployment and wages in a directed search framework.

19. Thursday, Nov. 22th.: We started to dicuss the Mortensen and Pissarides (1994) model, with endogenous job destruction.

18. Tuesday, Nov. 20th.: We finished the main part of the Pissarides paper and then derived a condition for the competitive equilibrium to be equivalent to the constrained allocation of the planner. We also discussed briefly how to use the model to account for business cycles statistics.

17. Thursday, Nov. 15th.: We started the discussion on the classic Pissarides (1994) paper.

16. Tuesday, Nov. 13th.: Finished the Lucas and Prescott Island model and started random matching.

15. Thursday, Nov. 8th.: Finished with McCall's model and introduced Lucas and Prescott's island model.

14. Tuesday, Nov. 6th.: Cameron presented the first part of problem set 3 while Dirina did the second part. After that, we continued the discussion of McCall's search model in the labor market and did some comparative statics.

13. Tuesday, Oct. 30th.: We started talking about how to understand unemployment and introduced models with labor search frictions. We went over Stigler's and McCall's models.

12. Thursday, Oct. 25th.: We discussed in detail this paper, which is a great example of (i) the need to consider household vs. individual information (for example, when considering labor supply) and (ii) a quantitative model that encompases labor supply, asset holdings, marriage market and dynamic decision making inside the household.:

11. Tuesday, Oct. 23rd.: We kept discussing collective/two person household models. We talked about efficiency, divorce and marriage. We then started thinking about how to move to a dynamic framework.

10. Thursday, Oct. 18th.: Alejandro presented the solution to the first part of problem set 2 and Erdal did the scond part (and pointed an error I made!). We then kept discussing the properties of collective models and the notion of bargaining power inside the household.

9. Tuesday, Oct. 16th.: We expanded the simple static labor supply model seen in the first class, to allow for heterogeneity in gender and marital status. We then discussed the ways in which we can solve for the allocations in a two person household (unitary vs. collective models).

8. Tuesday, Oct. 9th.: We discussed facts related to households in modern economies: fertility, marriage, gender wage gaps and others, and started discussion on how to model economies where there are demographics.

7. Thursday, Oct. 4th.: We discussed in depth the paper by Mark Huggett, Gustavo Ventura and Amir Yaron (here: note that there is a link for the dataset and the code used by the authors) its relationship with past literature (i.e., Keane and Wolpin's piece) and extensions/potential issues of the analysis.

6. Tuesday, Oct. 2nd: Evelyn presented part 1 of the first problem set and Adrian did part 2. We continued the discussion of labor supply in heterogeneous agent models with incomplete markets. We talked more specifics on experience profiles and how to disentangle initial conditions from labor market shocks to determine inequality in labor earnings.

5. Thursday, Sept.27th.: We discussed some computational issues/tips to solve the Aiyagari model and then jumped to a life-cycle version of the standard incomplete markets model. Here, we discussed equilibrium, experience profiles and life expectancy.

4. Tuesday, Sept. 25th.: We kept talking about models with endogenous labor supply. We discussed briefly Aiyagari (QJE 1994) and started the discussion of Keane and Wolpin (JPE 1997).

3. Thursday, Sept. 19th.: Discussion on variants of the standard neoclassical growth model: heterogeneity, where do experience profiles come from and discrete choices.

2. Tuesday, Sept. 18th.: Further discussion of the simple static labor supply model and labor supply elasticities. We followed with a small discussion on the problems with estimating these elasticities.

1. Thursday, Sept. 13th.: Start of classes. We discussed how we are going to structure the course and I talked about how important is to "learn by doing". We then talked about the survey in Keane (2010)