The course deals with labour economics issues that have macroeconomic implications. The main labour-driven macroeconomic problems to be addressed are unemployment, deficient skills and the macroeconomic implications of social fragmentation. Particular attention will be given to these problems in response to the challenges of digitalisation and globalisation. These issues will be related to policy concerns in the G20 aimed at recoupling economic and social prosperity. The underlying idea is that labour market problems are all symptoms of underlying market failures and government failures. Only by understanding the underlying failures can appropriate policies be designed. In this respect, labour market policy is analogous to medical intervention: Only once the underlying disease has been diagnosed can the appropriate treatment be prescribed. Accordingly, the course examines a number of important labour market “diseases” such as asymmetric information and asymmetric market power and derives suitable policies.
The course will cover the following topics:
- Macroeconomic empirical regularities concerning aggregate employment, unemployment, wage formation, productivity and inflation in OECD countries;
- The main conceptual challenges in accounting for these regularities;
- Market clearing theories of the labour market (Walrasian, price-misperceptions and market power);
- Non-clearing labour markets (efficiency wages, insiders versus outsiders and unions);
- Keynesian and search problems in the labour market;
- Identity formation and labour market activity;
- Inequality and social fragmentation;
- Organisational change and the future of work in the digital age; and
- Labour market policies to promote employment and skills.
Students will work in teams, each of which is required to (i) produce a research paper addressing a well-defined policy issue, containing theoretical and empirical analysis; (ii) produce a “policy brief” based on their research paper, and (iii) give a group presentation that describes the underlying challenge, the analysis of the challenge and the policy recommendations (combining the insights from the research paper and policy brief).
This course is for 2nd year MIA and MPP students only.