Ed192-2: Topics in Development and Labor Economics

Economics 192-2 Rajeev Dehejia

Topics in Labor and Development Economics 114A Braker

Department of Economics 617.627.4689

Time Tuesday, Thursday 12 pm Rajeev.Dehejia@Tufts.edu

This course discusses current research in labor and development economics though the lens of the modern empirical methods that are used in these fields. The goals of the course are to learn to think critically about empirical research and to provide students with a starting point for their own research.

The course is intended for upper division students with an interest in empirical research in labor and development economics and in public policy more generally. The course will help students to become intelligent consumers and producers of such research. As consumers, the course will develop students' critical capacity in thinking about policy claims and causal effects more generally. We have all been taught that "correlation is not causation" but the full range of implications of this maxim are underappreciated in empirical research. As producers, the course will provide students with a simple, but powerful toolkit that they can use in their own work in labor and development economics.

The class will be in a mixed lecture and seminar format. The first six weeks of the course will be in lecture format and will present the core empirical tools along with selected applications and examples from labor and development. In the second half, students will be responsible for 3 in-class presentations (20, 20, and 15 percent each) and a research paper (40 percent).

Discussion leader: Students will be responsible for picking one or two topics (this will depend on class numbers) and then presenting the key literature on that topic and leading a discussion in class (20 percent each). Students will prepare a list of study questions and distribute these two days prior to their presentation.

Discussant: Each student will also be selected once to be the discussant on a topic. The discussant will prepare brief answers to the study questions and will be responsible in a secondary capacity for seminar discussion (15 percent).

Debate: Depending on class numbers, we may also have two or three in-class debates. Students will prepare material and argue for or against a position that I will spell out (20 percent).

Research paper: Students will prepare a research paper on a topic of their choice (40 percent). It is natural, though not required, that the research paper cover the same question as your in-class presentation or discussion.

The grade will be based on: participation in class (10%), an in-class debate (25%), leading a seminar discussion (25%) and a paper (40%).

This syllabus contains two types of readings. Students are recommended to read at least the introduction of starred articles prior to the lecture. Non-starred articles are either applications that will be discussed in class or supplemental references.

Session 1: What is causality? Introduction to randomized trials. Where does program evaluation fit into cost-benefit analysis?

*Holland, P. (1986), "Statistics and Causal Inference" (with discussion), Journal of the American Statistical Association, 81, 945-970.

* James Heckman, "Causal Parameters and Policy Analysis in Economics: A Twentieth Century Perspective," Quarterly Journal of Economics, February 2000.

James Freedman, "Statistical Models and Shoe Leather," Sociological Methodology, Volume 21 (1991), pp. 291-313.

David Card and Philip Robins, "Do Financial Incentives Encourage Welfare Recipients to Work? Evidence from a Randomized Evaluation of the Self-Sufficiency Project," NBER Working Paper No. 5701.

Charles Michalopoulos, et al., "Making Work Pay: Final Report on the Self-Sufficiency Project for Long-Term Welfare Recipients", Social Research Demonstration Corporation, July 2002.

Joshua Angrist and Victor Lavy, "The Effect of High School Matriculation: Evidence from Randomized Trials," NBER Working Paper No. 9389.

Esther Duflo and Emmanuel Saez, "The Role of Information and Social Interactions in Retirement Savings Decisions: Evidence from a Randomized Experiment," QJE, August 2003.

See Alliance for Human Research Protection (http://www.ahrp.org) and NIH news (http://www.nih.gov/news/pr/jan2006/niaid-18.htm) inter alia.

Session 3: Evaluating the causes and consequences of child labor (part 1). Looking for "natural experiments"

*International Labor Organization, "The End of Child Labor: Within Reach," http://www.un.org/aroundworld/unics/english/ilo_childlabor_2006.pdf.

*Kathleen Beegle, Rajeev Dehejia, Roberta Gatti, "Child Labor and Agricultural Shocks," Journal of Development Economics, 2005.

Donald Parsons and Claudia Goldin, "Parental Altruism and Self-Interest: Child Labor Among Late 19^th Century American Families," Economic Inquiry, Volume 27 (October 1989), pp. 637-659.

Session 4: Evaluating the causes and consequences of child labor (part 2). Applying the method of instrumental variables.

*Beegle, Kathleen, Rajeev Dehejia, and Roberta Gatti, "Why Should We Care About Child Labor? The Returns to Schooling vs. the Returns to Experience in Vietnam".

*Imbens, Guido, and J. Angrist, "Identification and Estimation of Local Average Treatment Effects," Econometrica, Vol. 62, 467-75.

*Angrist, J., G. Imbens, and D. Rubin, "Identification of Causal Effects Using Instrumental Variables" (with discussion), Journal of the American Statistical Association, 91, 444-72.

James Heckman, "Instrumental Variables: A Study of Implicit Behavioral Assumptions", Journal of Human Resources.

Joshua Angrist and Guido Imbens, "Comment on 'Instrumental Variables: A Study of Implicit Behavioral Assumptions,'" JHR.

Supplemental material, Eric Edmonds, Should we boycott child labor?, Ethique économique/ Ethics and Economics 1(1), December 2003, http://mapage.noos.fr/Ethique-economique/html_version/Edmonds.pdf.

Session 5: Evaluating the Efficacy of Microcredit. Applying the method of difference in differences

Rajeev Dehejia, Jonathan Morduch, Heather Montgomery, "Do Interest Rates Matter? Credit Demand in the Dhaka Slums,"

Dean Karlan and Jonathan Zinman, "Credit Elasticities in Less-Developed Economies," manuscript.

Marianne Bertrand, Dean Karlan, Sendhil Mullainathan, et al., "What's Psychology Worth? A Field Experiment in the Consumer Credit Market," Working Paper, 2005.

Other useful readings: http://www.nyu.edu/projects/morduch/microfinance/index.html.

*Subramanian, Shankar and Angus Deaton (1996), "The Demand for Food and Calories," Journal of Political Economy, Vol. 104 (1), pp 133-62.

(http://links.jstor.org/sici?sici=0022-3808%28199602%29104%3A1%3C133%3ATDFFAC%3E2.0.CO%3B2-S&origin=repec)

(http://links.jstor.org/sici?sici=0022-3808%28198604%2994%3A2%3C297%3ADBNRFP%3E2.0.CO%3B2-S&origin=repec)

Strauss, John, and Duncan Thomas (1995), "Human Resources: Empirical Modeling of Household and Family Decisions." In Behrman, Jere and T.N. Srinivasan, eds., Handbook of Development Economics, Volume 3. Amsterdam: North Holland, pp. 1885-2023.

Srinivasan, T. N. (1994), "Destitution: A Discourse," Journal of Economic Literature, Vol. 32 (4), pp. 1842-55.

Dasgupta, Partha and Debraj Ray (1986), "Inequality as a Determinant of Malnutrition and Unemployment: Theory," The Economic Journal, Vol. 96 (384), pp. 1011-1034.

(http://links.jstor.org/sici?sici=0013-0133%28198612%2996%3A384%3C1011%3AIAADOM%3E2.0.CO%3B2-5&origin=bc)

* Gertler, Paul, and Jonathan Gruber (2002) "Insuring Consumption Against Illness," American Economic Review, 92 (1): 51-70.

*Miguel, Edward and Michael Kremer (2001), "Worms: Education and Health Externalities in Kenya" (forthcoming Econometrica)

*Duflo, Esther (2000), "Child Health and Household Resources in South Africa: Evidence from the Old Age Pension Program", American Economic Review

*Pritchett, Lant "Desired Fertility and the Impact of Population Policies. Population and Development Review, Vol.20 (no.1), March 1994.

*Knowles J.K, J.S Akin, P.K. Guilkey (1994). "The Impact of Population Policies: Comment" in Population Development Review, 20(3), pp.611-615.

*Bongaarts, John (1994). "The Impact of Population Policies: Comment" in Population Development Review, 20(3), pp.616-620.

*Pritchett, Lant H. (1994). "The Impact of Population Policies: Reply" in Population and Development Review, 20(3), pp 621-630.

* Pop-Eleches, Cristian, "The Supply of Birth Control Methods, Education and Fertility: Evidence from Romania", Columbia mimeo

* Garg, Ashish and Jonathan Morduch (1998), "Sibling Rivalry and the Gender Gap: Evidence from Child Health Outcomes in Ghana," Journal of Population Economics, Vol. 11 (4), pp. 471-493.

(http://www.springerlink.com/media/99alqkuqwgwcgrykklby/Contributions/L/B/E/R/LBERMXK1LY7P1CWC.pdf)

* Udry, Christopher (1996), "Gender, Agricultural Production, and the Theory of the Household," Journal of Political Economy, Vol. 104 (5), pp. 1010-1045.

(http://links.jstor.org/sici?sici=0022-3808%28199610%29104%3A5%3C1010%3AGAPATT%3E2.0.CO%3B2-G&origin=repec)

*Becker, Gary S. and H. Gregg Lewis. 1973. "On the Interaction between the Quantity and Quality of Children," Journal of Political Economy, Mar.-Apr., 81:2 (Part II), pp. S279-S288.

(http://links.jstor.org/sici?sici=0022-3808%28197303%2F197304%2981%3A2%3CS279%3AOTIBTQ%3E2.0.CO%3B2-I&origin=repec)

* Acemoglu, Daron, Simon Johnson and James A. Robinson (2001) "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, volume 91, No. 5, 1369-1401.

* Banerjee, Abhijit and Lakshmi Iyer, (2002), "History, Institutions and Economic Performance: The Legacy of Colonial Land Tenure Systems in India." mimeo.

(http://papers.ssrn.com/sol3/delivery.cfm/SSRN_ID321721_code020813510.pdf?abstractid=321721 )

Knack, Steven and Philip Keefer (1995) "Institutions and Economic Performance: Cross-Country Tests Using Alternative Measures," Economics and Politics, 7, 207-227.

Acemoglu, Daron, Simon Johnson and James Robinson (2002): "Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution" Quarterly Journal of Economics, volume 107, pp. 1231-1294.

* Djankov, R. La Porta, and F. Lopez-de-Silanes and A. Shleifer (2002) " The Regulation of Entry", Quarterly Journal of Economics, February, 2002.

(http://post.economics.harvard.edu/faculty/shleifer/papers/regulation_June_2001.pdf)

* Timothy Besley and Robin Burgess (2004),"Can Labor Regulation Hinder Economic Performance? Evidence from India", Quarterly Journal of Economics

*Burgess, Robin And Rohini Pande(2003), "Do Rural Banks Matter? Evidence from the Indian Social Banking Experiment," mimeo, Yale.

* Morduch, Jonathan (1999), "The Microfinance Promise," Journal of Economic Literature, Vol. 37 (4), pp. 1569-1614.

Aportela, Fernando (1998) 'The effects of financial access on savings by low-income people.' Mimeo, MIT

Pitt, Mark and Shahidur Khandker (1998), "The Impact of Group-based Credit Programs on Poor Households in Bangladesh: Does the Gender of Participants Matter?" Journal of Political Economy, Vol. 106 (5), pp. 958-996.

Development discussion topic 8: Savings, Risk and Insurance, and Consumption Smoothing

*Paxson, Christina (1992), Using Weather Variability to Estimate the Response of Savings to Transitory Income in Thailand,American Economic Review 82: 15-33.

http://links.jstor.org/sici?sici=0002-8282%28199203%2982%3A1%3C15%3AUWVTET%3E2.0.CO%3B2-R&origin=repec

*Morduch, Jonathan (1995), "Income Smoothing and Consumption Smoothing,Journal of Economic Perspectives 9(3), Summer, pp. 103-114.

http://links.jstor.org/sici?sici=0895-3309%28199522%299%3A3%3C103%3AISACS%3E2.0.CO%3B2-8&origin=bc

Murdoch, Jonathan, Risk, Production, and Saving: Theory and Evidence from Indian Households

Townsend, Robert (1994) "Risk and Insurance in Village India," Econometrica 62, May, 539-592.

Ravallion, Martin and Shubham Chaudhuri (1997), "Risk and Insurance in Village India: Comment," Econometrica 65(1), January: 171-84.

* Anne Case and Cally Ardington "The impact of parental death on school enrollment and achievement: Longitudinal evidence from South Africa"

(http://www.wws.princeton.edu/%7Erpds/downloads/case_ardington_parentaldeath.pdf)

* Evans, Dave and Ted Miguel (2004), "Orphans and Schooling in Africa: A Longitudinal Analysis"

Akresh Richard (2004), "Adjusting Household Structure: School Enrollment Impacts of Child Fostering in Burkina Faso"

(http://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID614482_code199490.pdf?abstractid=614482&mirid=1)

Development discussion topic 10: Experiments in the Field, Experiments in Practice

Esther Duflo, "Field Experiments in Development", http://econ-www.mit.edu/faculty/download_pdf.php?id=1265.

Development discussion topic 11: Anti-corruption experiments in the developing world

Raymond Fisman, "Estimating the Value of Political Connections," AER, 2001.

Marianne Bertrand, Simeon Djankov, Rema Hanna, and Sendhil Mullainathan, Driving Licenses in India: An Experimental Approach to Studying Corruption, http://economics.uchicago.edu/pdf/Bertrand_032706.pdf

*Joshua Angrist and William Evans, "Children and Parents' Labor Supply: Evidence from Exogenous Variation in Family Size," American Economic Review, Vol. 88, No. 3 (June 1998), pp. 450-477.

*Meyer, B., W.K. Viscusi, and D. Durbin (1995), "Worker' Compensation and Injury Duration: Evidence from a Natural Experiment," American Economic Review, Vol. 85, 322-40.

*Nada Eissa and Jeffrey Liebman, "Labor Supply Response to the Earned Income Tax Credit," Quarterly Journal of Economics, Volume 111, No. 2 (May 1996), pp. 605-637.

*Colin Camerer, Linda Babcock, George Loewenstein, and Richard Thaler, "Labor Supply of New York City Cabrrdrivers: One Day at a Time," Quarterly Journal of Economics, Vol. 112, No. 2 (May 1997), pp. 407-441.

Henry Farber, "Tomorrow Is Another Day?" Journal of Political Economy, Vol. 113, No. 1 (February 2005), pp. 46-.

Ernst Fehr and Lorenz Gotte, "Do Workers Work More When Wages are High? Evidence from a Randomized Field Experiment," IZA Working Paper No. 1002.

George Johnson, "The Labor Market Effects of Immigration," Industrial and Labor Relations Review, Vol. 33, No. 3 (April 1980), pp. 331-341.

------, "Changes in Earnings Inequality: The Role of Demand Shifts," Journal of Economic Perspectives, Vol. 11, No. 2 (Spring 1997), pp. 41-54.

David Card, "The Impact of the Mariel Boatlift on the Miami Labor Market," American Economic Review, Vol. 43, No. 2 (January 1990), pp. 245-257.

George Borjas, "The Labor Demand Curve Is Downward Sloping...", QJE, November 2003.

David Card, "Immigrant Inflows, Native Outflows, and the Local Market Impacts of Higher Immigration," JoLE, Vol. 19, No.1.

David Card and Alan Krueger, "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, 1994.

David Autor, Lawrence Katz, and Alan Krueger, "Computing Inequality: Computers Changed the Labor Market?", NBER Working Paper No. 5956.

David H. Autor, Lawrence F. Katz and Melissa S. Kearney, "Trends in U.S. Wage Inequality: Re-Assessing the Revisionists," NBER Working Paper, No. 11627.

Thomas Lemieux, "Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill?" manuscript, 2003 (forthcoming American Economic Review, 2006).

John DiNardo, Nicole Fortin, and Thomas Lemieux, "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Econometrica, Volume 64(5) (September 1996), pp. 1001-1044.

David Card and John DiNardo, "Skill Biased Technological Change and Raising Wage Inequality: Some Problems and Puzzles," Journal of Labor Economics, Volume 20(4) (2002), pp. 733-783.

Chinhui Juhn, Kevin Murphy, and Brooks Pierce, "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, Volume 101(3) (1999), pp. 410-442.

Emmanuel Saez and Thomas Piketty, "Income Inequality in the United States, 1913-1998," Quarterly Journal of Economics, Volume 118(1), 2003, pp. 1-39.

Peter Gottschalk and Robert Moffitt, "The Growth of Earnings Instability in the US Labor Market," Brookings Papers on Economic Activity, 1994, pp. 217-272.

Lawrence Katz and Kevin Murphy, "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," Quarterly Journal of Economics, Volume 107 (1992), pp. 35-78.

Daron Acemoglu, "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, Volume 40 (2002), pp. 7-72.

Aigner and Cain, "Statistical Theories of Discrimination in Labor Markets," Industrial and Labor Relations Review, 30(2), 1977, 175 – 187.

Phelps, Edmund, "The Statistical Theory of Racism and Sexism," American Economic Review, 62(4), 1972, 533-539.

Arrow, Kenneth, "The Theory of Discrimination," in Ashenfelter and Rees, eds., Discrimination in Labor Markets. Princeton: Princeton University Press, 1973.

Becker, Gary, The Economics of Discrimination, 2nd ed.. Chicago: University of Chicago Press, 1971.

Goldin, Claudia and C. Rouse, "Orchestrating Impartiality: The Impact of Blind Auditions on the Sex Composition of Orchestras." American Economic Review 90(4),

Fershtman, Chaim and Uri Gneezy, "Discrimination in a Segmented Society." Quarterly Journal of Economics, 116(1), 2001, 351-377.

Bertrand, Marianne and Sendhil Mullainathan, "Are Emily and Brendan More Employable than Latoya and Tyrone? A Field Experiment on Labor Market Discrimination," NBER Working Paper No. 9873, July 2003.

Neal, Derek A. and William R. Johnson, "The Role of Premarket Factors in Black-White Wage Differences," Journal of Political Economy, 104(5), 1996, 869 – 895.

Holzer, Harry J. and Keith R. Ihlanfeldt, "Customer Discrimination and Employment Outcomes for Minority Workers." Quarterly Journal of Economics, 113(3), 1998, 835-

Symposium: Discrimination in Product, Credit and Labor Markets, Journal of Economic Perspectives, 12(2), Spring 1998.

Hamermesh, Daniel and Jeff Biddle, "Beauty and the Labor Market," American Economic Review, 84(5), 1994, 1174-1194.

Farber, Henry and Robert Gibbons, "Learning and Wage Dynamics," Quarterly Journal of Economics, 111(4), 1996, 1007 – 1047.

Altonji, Joseph and Charles Pierret, "Employer Learning and Statistical Discrimination," Quarterly Journal of Economics, 116(1), 2001, 313-350.

Esther Duflo and Emmanuel Saez, "The Role of Information and Social Interactions in Retirement Savings Decisions: Evidence from a Randomized Experiment," QJE, August 2003.