ECON 270

Labor Economics

 

Fall Term 2026
Instructor: TBA	Total lectures: 35 Lectures
Office Hours: TBA	Lecture Length: 145 Minutes
Classroom: TBA	Credits: 3 Units
Class Length: 7 Weeks	Language: English

Course Overview:

This course provides an introduction to the theoretical frameworks and empirical evidence in

labor economics. Students will explore the fundamental dynamics of labor supply and demand,

the determination of labor market equilibrium, and the economic rationale behind investments in human capital and education. The curriculum also examines critical topics such as compensating wage differentials, the causes and consequences of wage inequality, the role of incentive pay, and the complexities of unemployment, job search, labor mobility, and market discrimination.

Through this exploration, students will gain a comprehensive understanding of contemporary labor market issues and policy implications.

Required Material:

The required textbook for this course is Borjas, George. Labor Economics, Ninth Edition. Additional instructor-provided lecture notes and supplementary materials may be used to support selected topics covered in the course.

Learning Objectives:

1. Analyze the theoretical models of labor supply and demand and their impact on market equilibrium.

2. Evaluate the factors influencing human capital investments and their role in wage determination and inequality.

3. Interpret the economic implications of labor market phenomena such as unemployment, discrimination, and unionization.

4. Assess various labor market policies and their effectiveness in addressing issues like compensating wage differentials and incentive structures.

 

Course Outline:

 

Week 1: Foundations of Labor Markets and Supply

Lecture 1: Introduction to Labor Economics

 

• Overview of labor market concepts and scope

• Defining labor economics as a field of study

 

Lecture 2: Individual Labor Supply Decisions

• Utility maximization and leisure-income trade-offs

• Analyzing the individual's optimal work-leisure choice

 

Lecture 3: Income and Substitution Effects on Labor Supply

• Impact of wage changes on labor supply

• Understanding the income and substitution effects

 

Lecture 4: Household Labor Supply and Participation

• Family decision-making regarding labor supply

• Factors influencing labor force participation rates

 

Lecture 5: Public Policy and Labor Supply

• Effects of non-labor income on work incentives

• Government programs and their impact on labor supply

 

Week 2: Firm Labor Demand and Market Equilibrium

Lecture 6: The Demand for Labor by Firms

• Analyzing derived demand for labor

• Short-run labor demand with fixed capital

 

Lecture 7: Long-Run Labor Demand Analysis

• Scale effect and substitution effect

• Impact of technology and production functions

 

Lecture 8: Elasticity of Labor Demand

• Measuring responsiveness of labor demand to wages

• Factors determining the elasticity of labor demand

 

Lecture 9: Competitive Labor Market Equilibrium

• Determination of wages and employment levels

• Efficiency implications of competitive equilibrium

 

Lecture 10: Applications of Labor Market Equilibrium

• Analyzing minimum wage policies

• Impact of payroll taxes and subsidies

 

 

Week 3: Human Capital Investments and Returns

Lecture 11: Theory of Human Capital Investments

• Understanding costs and benefits of investments

• Framework for analyzing human capital decisions

 

Lecture 12: Education as an Investment

• Optimal schooling decisions and lifetime earnings

• Calculating the rate of return to education

 

Lecture 13: Education and Wage Differentials

• Role of education in determining wage structures

• Empirical evidence on education's impact on wages

 

Lecture 14: Signaling versus Human Capital Theory

• Education as a signal of ability to employers

• Comparing signaling and productivity enhancement models

 

Lecture 15: On-the-Job Training and Human Capital

• General versus firm-specific human capital

• Investment in and returns from workplace training

 

Week 4: Wage Structures and Labor Market Inequality

Lecture 16: Compensating Wage Differentials

• Wages for non-pecuniary job characteristics

• Risk, amenities, and job satisfaction premiums

 

Lecture 17: The Wage Distribution and its Determinants

• Analyzing patterns in the distribution of wages

• Factors influencing an individual's wage level

 

Lecture 18: Measuring Wage Inequality

• Concepts and metrics for wage inequality

• Analyzing income share and Gini coefficients

 

Lecture 19: Causes of Wage Inequality

• Technological change and skill-biased demand

• Globalization, de-unionization, and institutional factors

 

Lecture 20: Policy Responses to Wage Inequality

• Role of minimum wage in addressing inequality

• Education, training, and progressive taxation

 

Week 5: Worker Mobility and Unemployment Dynamics

Lecture 21: Geographic Labor Mobility

• Economic models of migration decisions

• Push and pull factors in internal migration

 

Lecture 22: Occupational and Inter-firm Labor Mobility

• Factors influencing career and job changes

• Understanding voluntary and involuntary job separations

 

Lecture 23: Types of Unemployment

• Frictional, structural, and cyclical unemployment

• Causes and characteristics of different unemployment types

 

Lecture 24: The Natural Rate of Unemployment

• Factors determining the long-run unemployment rate

• Relationship between inflation and unemployment

 

Lecture 25: Unemployment and Labor Market Policies

• Impact of unemployment insurance benefits

• Government training programs and active labor market policies

 

Week 6: Job Search Theory and Market Discrimination

Lecture 26: Economic Models of Job Search

• Analyzing optimal search intensity decisions

• Determination of the reservation wage

 

Lecture 27: Returns to Job Search

• Impact of search duration on accepted wages

• Understanding the efficiency of job search

 

Lecture 28: Theories of Labor Market Discrimination

• Taste-based discrimination (Becker's model)

• Statistical discrimination based on group averages

 

Lecture 29: Measuring Labor Market Discrimination

• Analyzing wage gaps and employment differences

• Use of audit studies and natural experiments

 

Lecture 30: Economic Impacts of Discrimination

• Efficiency losses due to discrimination

• Consequences for affected groups and society

 

Week 7: Labor Institutions and Contemporary Issues

Lecture 31: Labor Unions: Structure and Functions

• Collective bargaining and union objectives

• Membership trends and legal frameworks

 

Lecture 32: Economic Impact of Labor Unions

• Effects on wages, employment, and productivity

• Union wage gap and rent-seeking behavior

 

Lecture 33: Incentive Pay and Performance

• Designing compensation for worker motivation

• Piece rates, bonuses, and executive compensation schemes

 

Lecture 34: The Gig Economy and Future of Work

• Implications of flexible work arrangements

• Automation, AI, and changing employment landscapes

 

Lecture 35: Behavioral Insights in Labor Economics

• Psychological biases influencing labor decisions

• Contemporary issues in global labor markets

 

Grading Assessment:

Assignment 1	15%
Assignment 2	15%
Midterm	30%
Final project	30%
Seminar Participation	10%
Total	100%

Assignments:

Students are required to complete two written assignments during the semester, each ranging between 1000–1500 words. The assignments should demonstrate students’ ability to understand and critically engage with course-related topics, develop clear and coherent arguments, and

support their ideas with relevant evidence and examples. Assessment will focus on the depth and quality of analysis, clarity and organization of ideas, appropriate use of evidence and references, and accuracy of grammar, syntax, and academic language. Specific topics, guidelines, and submission deadlines will be provided by the instructor during the course. Assignments should be submitted electronically in the required format, and feedback on the first assignment will be provided to help students improve their writing and analytical skills for the second assignment.

 

Attendance:

Regular attendance and active participation are expected. Students are responsible for all material covered during scheduled lectures and are expected to complete assigned work in accordance with course requirements.

Exams:

Assessment in this course comprises a midterm examination and a final project. The midterm will feature a mixed-format assessment, including conceptual questions, short-answer responses, discussion prompts, analytical problems, and brief essay responses covering material from the

first half of the term. The final assessment is a project-based endeavor, requiring students to develop a structured analytical essay on a specific labor market issue, policy, or theoretical debate addressed throughout the course.

Final Evaluation:

Letter Grade	Percentage (%)	Letter Grade	Percentage
A+	≥95	C+	64-67
A	89-94	C	60-64
A-	84-88	C-	56-59
B+	79-83	D+	54-56
B	73-78	D	50-53
B-	68-72	F	≤50

General Policies:

Academic integrity

Academic integrity is the cornerstone of academia and requires students and researchers to

maintain honesty, fairness, trust and responsibility in all academic activities. It includes not only avoiding dishonest behaviors such as plagiarism, cheating, and falsifying data, but also requires taking responsibility for one's own academic actions and ensuring that all work is done

independently and accurately cites the research of others. Violations of academic integrity can result in severe academic penalties, such as zero grades, suspension or even expulsion, and can cause serious damage to an individual's reputation and future career. Upholding academic

integrity is therefore essential to promoting a fair academic environment and facilitating the authentic dissemination of knowledge.

 

Accessible Resources Policy

The policy ensures that all students, especially those with disabilities, are able to participate equally in school learning and activities. The school provides a wide range of accessibility resources including, but not limited to, specialized classrooms, hearing aids, Braille textbooks, assistive technology, and flexible testing arrangements. Students are required to apply to the

 

school in advance and provide appropriate medical or psychological evaluations so that an individualized support plan can be developed for them. This policy is designed to remove

barriers in the academic environment and to ensure that every student has access to equitable learning opportunities.

 

Withdrawal Policy

Students may choose to withdraw from a course within a specified period of time, and may not be able to do so after the expiration date. When withdrawing from a course, students are required to fill out a withdrawal form with a reason, which will be reviewed and processed on a case-by- case basis. Withdrawal from a course may not affect the student's academic performance. If a

student withdraws from a course with incomplete requirements, a “W” may be assigned instead of a grade, depending on the course.