A. INTRODUCTION

1. Introduction (Chapter 1)

a. Basic Concepts

(1) Scarcity

(2) Opportunity Cost

(3) Rationality

b. Basic Themes

(1) The Invisible Hand

(2) Institutions

(3) Voluntary Exchange vs Coerced Exchange

(4) Market Failures

(a) Imperfect Information

(b) Transactions Barriers

(c) Lessons

2. The Basic Supply-Demand Model (Chapter 6)

a. Demand for Labor

(1) Law of Demand (other things held constant)

(2) Wage changes: Movement along the demand curve

(3) DETERMINANTS OF LABOR DEMAND: Shifts in Demand

b. Supply of Labor

(1) Law of Supply (other things held constant)

(2) Wage changes: Movement along supply curve

(3) DETERMINANTS OF LABOR SUPPLY: Shifts in supply

c. Labor Markets

(1) Markets: Review

(a) Equilibrium

(b) Disequilibrium: The adjustment process

(2) Markets as efficient rationing mechanisms

(3) Employers' Surplus and Workers' Economic Rent

(4) Alternative Theory of Labor Market

(5) Welfare losses and inefficiency

(a) Assumes no market failure

(b) Some government policy imposed: Affects employers by decreasing demand

(c) Graphical analysis

d. Applications

(1) Inhospitable climates: Alaska v. Lower 48

(2) The Military

1. Basic Theory (Chapter 5)

a. Introduction

(1) DERIVED DEMAND

(2) LAW OF DIMINISHING MARGINAL RETURNS

(3) MP = MARGINAL PRODUCT

(4) VMP = VALUE OF MARGINAL PRODUCT

(5) MRP = MARGINAL REVENUE PRODUCT

(6) MRP = P(MP)

(7) Numerical example.

(8) Graph.

(9) MWC = MARGINAL WAGE COST

(10) AWC = AVERAGE WAGE COST

(11) Graph.

(12) MRP = MWC RULE (Profit -maximizing firm)

(13) Graph.

(14) Alternative approach to profit-maximizing.

b. EFFICIENT ALLOCATION OF LABOR

c. Three inputs: Capital, Unskilled Labor, and Skilled Labor

(1) Substitutes in production

(a) GROSS SUBSTITUTES

(b) GROSS COMPLEMENTS

d. Application: MINIMUM WAGE

(1) Background

(2) Graph: Two sector model

(3) Efficiency loss

(4) Refinements

(5) Problems

2. Elasticity of Demand for Labor (Chapter 5)

a. Definitions

(1) Basic idea of elasticity

(2) WAGE ELASTICITY COEFFICIENT

(3) WAGE ELASTICITY OF LABOR SUPPLY

(4) Arc elasticity formula (optional)

b. Graphs

(1) The demand curve: Elastic region, inelastic region, unit elastic point.

(2) Relatively elastic and inelastic demand curves.

(3) TWB = TOTAL WAGE BILL

(4) TOTAL WAGE BILL RULES

c. Hicks-Marshall Laws of Derived Demand. The demand curve will be more elastic when:

(1) Demand for final product is more elastic.

(2) It is relatively easy to substitute other factors of production.

(3) The supply of other factors of production is more elastic.

(4) Labor costs as a proportion of total costs increase.

d. Applications

(1) The Burden of the Tax

(2) Investment tax credits

(3) Employment tax credits (wage subsidies)

3. Firms' Investments in Human Capital (Chapter 4)

a. Introduction: Non-wage Labor Costs

(1) Hiring and Training Costs

(2) Quasi-Fixed: Means that costs per worker are fixed (do not very with the number of hours worked).

b. Firms' Investments in Human Capital

(1) One period model

(2) Investment in human capital

(3) Two period model: Assumptions

(4) Two period model: Graph

(5) Concept of Present Value = PV

(6) Use PV in Two Period Model

c. Types of Training Investments

(1) GENERAL TRAINING

(2) SPECIFIC TRAINING

(3) Will firms pay for general training?

(4) Will firms pay for specific training?

(5) Application: Steelworkers

(6) Application: The Minimum Wage Again

(7) Application: A Case of Employer Discrimination?

(8) STATISTICAL DISCRIMINATION: Result of Imperfect Information

d. Types of Hiring Investments

(1) Credential or Screening Devices

(2) Internal Labor Markets

1. The Supply of Labor: Basic Theory and Applications (Chapter 2)

a. Theory: Verbal Analysis

(1) Demand for leisure

(2) Factors affecting demand for leisure

(3) Analysis

b. Theory: Graphical Analysis

(1) Preferences: Utility and the indifference curve.

(2) Budget Line

(3) Indifference curves and budget lines: Maximizing utility.

c. Applications

(1) Income Replacement (UI, WC, DI)

(2) Income maintenance (welfare)

2. Investment in Human Capital (Chapter 4)

a. Overview

(1) An idealized age-earnings profile

(2) The PV of a future stream of income

b. Signaling

(1) The basic argument

(2) The detailed argument

c. Is Education a Good Social Investment?

(1) Education create external benefits and hence will be underproduced by the market.

(2) Doubts

d. Applications

(1) Post-School Investment: OJT

(2) Women and the acquisition of human capital

(3) The Minimum Wage again

1. Migration and Mobility (Chapter 9)

a. Determinants of Mobility

b. Geographic Mobility

c. Evidence on Returns to Migration

d. Family Migration

e. Immigration Policy

2. Unions and the Labor Market (Chapter 6, 11, 13)

a. Review of Laws

b. Union Goals

c. Effects of Unions on Wage Differentials

d. Effects of Unions on Productivity

e. Unions and Profitability

f. Unions and Human Capital Investment

g. Unions and the Free-Rider Doctrine

h. Bellante and Porter, "Agency Cost, Property Rights, and the Evolution of Labor Unions"

i. Dwight Lee, "Union Myopia and the Taxation of Capital"

j. Ippolito: Unions and ERISA