Econometrics of Labor Markets
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Course Introduction
This course explores the application of econometric methods to analyze labor market phenomena, focusing on topics such as wage determination, employment dynamics, labor supply and demand, human capital investment, discrimination, and the evaluation of labor market policies. Students will learn to use empirical data and advanced econometric techniques including instrumental variables, panel data methods, and causal inference tools to investigate issues such as wage inequality, unemployment, and labor mobility. Emphasis is placed on interpreting results from real-world datasets and critically assessing empirical research in labor economics.
Recommended Textbook Labor Economics 7th Edition by George J Borjas
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12 Chapters
360 Verified Questions
360 Flashcards
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Page 2
Chapter 1: Introduction to Labor Economics
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Sample Questions
Q1) Which of the following affects the wage a firm is willing to pay its workers?
A)The productivity of workers.
B)Consumer demand for the goods and/or services that the firm creates.
C)The amount of fringe benefits the firm is required by law to pay.
D)The level of payroll taxes the firm must pay.
E)All of the above affect the wage a firm is willing to pay its workers.
Answer: E
Q2) Which of the following is a positive (rather than a normative) question?
A)What effect does increasing welfare assistance by 20% have on female labor supply?
B)Should the U.S. allow unlimited immigration?
C)Should the "Highly Qualified Teacher" provision of No Child Left Behind be eliminated?
D)Should there be a minimum wage?
E)Should trade unions be allowed to lobby Congress?
Answer: A
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3
Chapter 2: Labor Supply
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Sample Questions
Q1) Prior to an expanded child care subsidy program in Illinois, the labor force participation rate of single mothers in Illinois was 45% and in Wisconsin was 48%. After Illinois expanded its child care subsidy program, the participation rate increased to 58% in Illinois and to 51% in Wisconsin. The expanded child care program in Illinois is estimated to increase labor force participation of single mothers by how much according to a difference-in-differences estimator?
A)3%
B)6%
C)7%
D)10%
E)13%
Answer: D
Q2) Roughly what was the female labor force participation in the United States in 2010?
A)33%
B)50%
C)60%
D)70%
E)85%
Answer: D
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Chapter 3: Labor Demand
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Sample Questions
Q1) Firms usually face asymmetric variable adjustment costs because
A)hiring costs are typically higher than firing costs.
B)firing workers is relatively easy compared to hiring workers.
C)firing workers can be difficult and costly for legal reasons compared to hiring workers.
D)workers are reluctant to change jobs during a recession but not during an expansion.
E)firms vary in size.
Answer: C
Q2) Labor demand is more elastic the greater the elasticity of demand for the firm's output because
A)the firm would see its quantity demanded fall substantially if the firm tried to pass increased labor costs through to the consumer by increasing the price of the output good.
B)the firm's output price falls when the firm produces less output.
C)a firm that operates in a competitive output market cannot lower its price.
D)capital is usually price elastic.
E)the firm will want to hire fewer workers when the wage rate increases.
Answer: A
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Page 5
Chapter 4: Labor Market Equilibrium
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Sample Questions
Q1) The standard cobweb model makes the following two assumptions:
A)Workers are forward-looking, and job adjustments take time.
B)Workers are myopic, and job adjustments take time.
C)Workers are forward-looking, and job adjustments are instantaneous.
D)Workers are myopic, and job adjustments are instantaneous.
E)Workers are myopic, and retraining of one's skills happens instantaneously.
Q2) Many immigrants and many American high school dropouts possess very few skills. What impact will these low-skill immigrants likely have on the labor market opportunities of American high school dropouts?
A)Immigration of low-skilled workers is associated with higher wages paid to American high school dropouts.
B)Immigration of low-skilled workers is associated with lower wages paid to American high school dropouts.
C)Immigration of low-skilled workers does not affect wages paid to American high school dropouts.
D)Immigration of low-skilled workers is associated with greater employment among American high school dropouts.
E)None of the above.
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Chapter 5: Compensating Wage Differentials
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Sample Questions
Q1) Suppose 1 in 200 pilots flying Space-X aircraft dies each year while only 1 in 500 pilots flying Subspace Gliders dies each year. Moreover, the average salary of Space-X pilots is $115,000, while the average salary of Subspace Glider pilots is $109,000. Given this information, what is the implied statistical value of a life of a pilot?
A)$6,000
B)$120,000
C)$480,000
D)$1,200,000
E)$2,000,000
Q2) One implication of the theory of compensating differentials is that jobs in states with high income tax rates are likey to
A)be associated with more fringe benefits.
B)be associated with fewer fringe benefits.
C)pay the same wage and offer the same fringe benefits package as the same jobs in lower-tax states.
D)have worse working conditions.
E)be seasonal in nature.
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Chapter 6: Human Capital
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Sample Questions
Q1) Selection bias is a problem when trying to estimate the return to education in a standard human capital model. In this context, what does selection bias refer to?
A)Having a non-random data sample.
B)Workers self-select education levels and jobs based on their abilities and preferences.
C)Colleges select who they are willing to accept.
D)The wage-schooling locus does not have a constant slope.
E)The wage-schooling locus is estimated to have a negative slope.
Q2) Which of the following reasons is not a likely explanation as to why college completion rates are greater, on average, for whites than for blacks?
A)Tuition costs are lower for whites than blacks.
B)Whites have access to more financial capital to pay for college than blacks.
C)Post-college wages are higher for whites than for blacks.
D)Whites have greater access to higher quality public education at the elementary and secondary level.
E)Whites are more able to postpone earnings at age 18 than are blacks.
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8
Chapter 7: The Wage Structure
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Sample Questions
Q1) How does the income distribution in the United States compare to other developed countries?
A)The income distribution is vastly more unequal in the United States compared to other developed countries.
B)The income distribution is vastly more equal in the United States compared to other developed countries.
C)The income distribution tends to be more unequal in the United States compared to other developed countries, but not by a huge amount.
D)The income distribution tends to be more equal in the United States compared to other developed countries, but not by a huge amount.
E)The income distribution must be the same in all developed countries, the United States included, because of increased globalization.
Q2) Wage differentials across individual workers are determined in part by:
A)Effort.
B)Productivity.
C)Social capital.
D)Luck.
E)All of the above.
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Chapter 8: Labor Mobility
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Sample Questions
Q1) Suppose there is currently positive selection of immigrants to the United States. What would happen to immigration to the U.S. if the return to skills were to fall in the United States?
A)The same selection of immigrants would continue to come to the United States.
B)The selection of immigrants to the United States would switch from being positive to being negative.
C)The selection would remain positive but with more workers immigrating to the United States.
D)The selection would remain positive, but the average skills of immigrants would fall.
E)The selection would remain positive, but the average skills of immigrants would increase.
Q2) Compared to older workers with several years of experience with one firm, newly hired young workers typically
A)have higher turnover.
B)have more on-the-job training.
C)have more experience.
D)are likely to stay with their job longer.
E)tend to earn more than their experienced colleagues.
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Page 10
Chapter 9: Labor Market Discrimination
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Sample Questions
Q1) Consider a color-blind firm that is currently maximizing profits. An affirmative action policy is put in place requiring that all firms in the industry abide by a certain quota. Which of the following will occur?
A)There will be no effect because the firm is currently color-blind.
B)If the quota is already met, the firm will make no changes in its hiring practices.
C)If the firm currently meets the required quota, it will cut costs by adjusting labor to exactly meet the affirmative action requirements.
D)If the firm currently meets the quota, it will begin to lose profits due to the affirmative action requirements.
E)The firm will have to fire some workers.
Q2) From 1980 to 2012, the female-male wage ratio in the United States
A)held constant at about 0.7.
B)fell steadily from about 1.0 in 1980 to 0.5 in 2012.
C)increased modestly from 0.5 in 1980 to almost 0.6 in 2012.
D)increased substantially from 0.6 in 1980 to almost 0.8 in 2012.
E)increased substantially from 0.4 in 1980 to just under 0.7 in 2012.
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11
Chapter 10: Labor Unions
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Sample Questions
Q1) Which one of the following statements is true?
A)Firms try to attract unions to their plants and factories.
B)Unions are beneficial to all workers.
C)Unions tend to negotiate better fringe benefits for their members than what non-union workers receive.
D)Many workers are likely to lose their jobs when firms become unionized.
E)A union is legally allowed to undertake any bargaining tactics that it wishes.
Q2) The union wage gap for private sector unions in the United States is presently on the order of
A)2%.
B)8%.
C)15%.
D)28%.
E)39%.
Q3) A strike
A)can be a rational response during the union-firm negotiation process.
B)is a Pareto optimal outcome.
C)hurts the firm's management and share holders but not the union members.
D)is never in the best interest of the rank and file.
E)is always in the firm's best interest.
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Chapter 11: Incentive Pay
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Sample Questions
Q1) One argument against using a profit-sharing scheme is the potential for free-riding. In this situation, free-riding refers to
A)one firm using the same contract specifications as another firm.
B)a worker not providing effort because his contribution to profit is very small.
C)a worker not providing effort because he doesn't want his co-workers' wages to increase.
D)the firm not honestly reporting its profits.
E)profits being insensitive to worker effort because all increases in profit are returned to the workers due to the profit-sharing scheme.
Q2) What happens to the piece rate if there is a ratchet effect?
A)The piece rate decreases over time.
B)The piece rate increases over time.
C)The piece rate is replaced with a time rate.
D)The piece rate is replaced with a salary contract.
E)The piece rate is only paid to the least productive workers.
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13
Chapter 12: Unemployment
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Sample Questions
Q1) An important development during the Great Recession of 2007-2010 was that
A)more than 35 percent of all unemployed workers remained unemployed for more than 26 months.
B)most unemployment spells lasted 13 to 26 weeks.
C)the unemployment rate increased dramatically, but the average unemployment spell remained constant at about 8 weeks of unemployment.
D)more than 70 percent of all unemployed workers exited unemployment within 5 weeks; however, most of this movement was due to the unemployed becoming discouraged and exiting the labor force rather than finding a job.
E)the amount of frictional and seasonal unemployment increased dramatically while the amount of structural unemployment decreased substantially.
Q2) From 1980 through 2005, unemployment rates have been _________ in Europe relative to in United States.
A)higher
B)lower
C)about the same
D)unpredictable
E)adjusting
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Page 14