Labour Economics and Inequality

Fields of research can define themselves by their questions, theories, or methods. All three matter for labour economics. Modern labour economics has considerably expanded the set of questions it considers, while settling on a core of commonly accepted methods, focused on causal identification using observational data. Correspondingly, we will begin with the microeconomic foundations of the supply and demand for labour and examine the resulting labour market equilibrium. This then allows us to consider the impact of public policies such as taxes and the minimum wage on labour market outcomes. Finally, we will zoom in on one of the core questions of labour economics, wage inequality and the determination of earnings. We will discuss the trends in wage inequalities over the past decades, as well as methodological issues in estimating inequality. Throughout this topic, we will survey the standard approaches to causal identification, including randomized experiments, instrumental variables, matching on observables, difference in differences, and regression discontinuity. We will discuss recent empirical applications which use these methods, covering a wide range of questions.