14.64 | Fall 2009 | Undergraduate

Labor Economics and Public Policy


An outline of course topics is available below.

Course Meeting Times

Lectures: 2 sessions / week, 1.5 hours / session

Recitations: 1 session / week, 1 hour / session


This course is an introduction to labor economics with an emphasis on applied microeconomic theory and empirical analysis. We are especially interested in the link between research and public policy. Topics to be covered include: labor supply and demand, taxes and transfers, minimum wages, immigration, human capital, education production, inequality, discrimination, unions and strikes, and unemployment.


Prerequisites include basic-to-intermediate microeconomics and a course in statistics or econometrics. Also helpful is some experience with statistical computing, ideally using Stata or SAS.

Course Requirements

In addition to exams and readings, there are four problem sets, each of which have a computer-exercise component. There are also ungraded review problem sets at the beginning and the end of the course. Students are expected to participate in class discussions.

Required Text

Borjas, George J. Labor Economics. 5th ed. Boston, MA: McGraw-Hill/Irwin, 2010. ISBN: 9780073511368.

This edition differs little from the 4th edition, which you may also use, though note changes in chapter and section numbers:

Borjas, George J. Labor Economics. 4th ed. Boston, MA: McGraw-Hill/Irwin, 2008. ISBN: 9780073402826.


Problem sets 30%
Midterm 30%
Final exam 40%

The best three out of the four problem sets will be counted for the grade. There is a 10% bonus for strong participation as determined by contribution to class discussion and regular attendance.

Course Outline

  1. Introduction: facts about employment and earnings; the supply and demand framework
  2. Labor Supply
    • Introduction
    • Application: welfare and earned income tax credit (EITC)
    • Application: intertemporal substitution on the road and at the ballpark
    • Income effects on labor supply
    • Unemployment and unemployment insurance
  3. Home production and the decision to work; the economics of the family
    • Introduction
    • Empirical methods: instrumental variables
    • Application: children and their parents’ labor supply
  4. The demand for labor, minimum wages, monopsony
    • Introduction
    • Applications: minimum wages and labor supply shifts
  5. Human capital, education, and training
    • Introduction
    • Applications: the economic returns to all sorts of human capital
    • Applications: education production
  6. The wage structure
  7. Discrimination
    • Introduction
    • Application: the effects of anti-discrimination policy
  8. Unions and bargaining
    • Introduction
    • Union relative wage effects

Course Info

As Taught In
Fall 2009
Learning Resource Types
Problem Sets with Solutions