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Fundamentals of Labor Economics 2nd Edition

Thomas Hyclak, Geraint Johnes, Robert Thornton

  • Published
  • Previous Editions 2005
  • 528 Pages


Labor Economics, 2e covers the essential aspects of modern labor economics from an international perspective, providing students with a comprehensive survey of economic theory and empirical evidence on purely competitive labor markets. In addition, the authors examine the impact of imperfect competition, incomplete information and uncertainty, and institutional factors--stemming from laws, unions, and human resource policies--on wages and employment opportunities.

Thomas Hyclak, Lehigh University

Thomas Hyclak has been a member of the economics faculty at Lehigh since 1979 and was department chair from 1999 to 2006. He served the College of Business and Economics as Interim Dean. His research has involved a number of empirical studies of the determinants of wage levels, unemployment and earnings distributions in urban labor markets. Professor Hyclak has also published several studies of the impact of human resource management innovations and industrial relations activities on the performance of workers and their organizations.

Geraint Johnes, Lancaster University Management School

Geraint Johnes is the Dean of the Graduate Studies at Lancaster University Management School, where he teaches international human resource management. He also currently teaches undergraduate courses in introductory economics; applied economics; quantitative methods; and human resource economics. His current research is in grade inflation and changes in efficiency in educational institutions; impact of curriculum on subsequent labor market performance; and funding mechanisms for education and their effect on economic welfare.

Robert Thornton, Lehigh University

Robert Thornton is an Associate Director of the Martindale Center for the Study of Private Enterprise. His research interests lie in the areas of labor economics (particularly unionism in the public sector, occupational licensing, and labor market discrimination) and forensic economics. He teaches courses in labor economics and statistics. He received his Ph.D. in Economics from the University of Illinois after having served as a research assistant at the Brookings Institution. He began his academic career at Lehigh in 1970, and has been a Visiting Research Professor at the University of Sussex (UK) and University College Dublin (Ireland). He also serves as a private consultant in litigation involving personal injury, wrongful death, and discrimination.
  • Changes to Second Edition of Fundamentals of Labor Economics.
  • Expanded coverage of cyclical unemployment in light of the current slump. This entails substantial revision of Chapter 14, which previously focused on factors affecting non-cyclical unemployment rates. This also entailed inserting relevant discussion of current events in other chapters. For example, the book now provides coverage of the use of furloughs and pay cuts instead of layoffs in chapter 10 and the impact of the recession on migrant labor within the EU in chapter 8.
  • Greater coverage of immigration, with emphasis on immigration theory, economic effects, and public policy. The focus is on both the U.S. and on other countries (particularly within Europe).
  • Updated chapter on unionism (chapter 12) to incorporate latest developments in union membership, union wage policy in times of recession, economic effects, and public policy (e.g., the Employee Free Choice Act).
  • Added the topic of occupational licensing. Occupational licensing requirements now affect more than twice as many workers as do unions in the U.S.; and recent work by Kleiner, Krueger, and others has analyzed the growth and impacts of licensing. Yet other labor economics textbooks devote little or no attention to this increasingly important topic. Licensing is covered as an addition to the unionism chapter.
  • Devoted more attention to on-line instructor support materials, including an instructor's manual, test questions and links to data sets that can be used by students for class projects. This is an important text selection feature that stood out in the survey of labor economics instructors.
  • Extended coverage of personnel economics, including aspects of labor turnover not covered in the chapter on job search (e.g., duration models), impact on company performance of various HRM methods, in addition to the existing material on remuneration and incentive mechanisms.
  • Systematic increase throughout in references to recent empirical work that places emphasis on difference-in-difference methods and natural experiments.
  • Devoted more attention to on-line instructor support materials, including an instructor's manual, test questions and links to data sets that can be used by students for class projects. This is an important text selection feature that stood out in the survey of labor economics instructors.
The Study of Labor Economics. The Scope of Labor Economics. The Method of Labor Economics. Labor Market Theory. Labor Market Institutions. Empirical Analysis. Policy Analysis. International Comparisons. The Plan of This Book.
Appendix: Regression Analysis.

The Demand for Labor. THE WAY WE WORK: Labor Demand. The Production Function. The Marginal Product of Labor. The Short-Run Demand for Labor. The Short-Run Demand for Labor: An Example. Conditions for the MP to Represent Labor Demand. The Demand for Labor in Noncompetitive Product Markets. What Determines the Position of the Short-Run Demand for Labor? A Note on Exploitation. The Demand for Labor in the Long Run.
Appendix: Technological Change and Labor Demand

Topics in Labor Demand
Elasticities. The One-Wage Elasticity of Labor Demand. The Cross-Elasticity of Labor Demand. The Elasticity of Substitution. THE WAY WE WORK: The Case of the Vanishing Bank Teller. How Elastic Is the Demand for Labor?. PUTTING THEORY TO WORK: Do Imports from Low-Wage Countries Reduce the Domestic Demand for Labor?. Extensions and Embellishments of Marginal Productivity Theory. The Independence of Wages and Productivity. Fixed Costs of Employment. Are Workers Paid Their Marginal Product?
Appendix: A Test of the Marginal Productivity Theory: A Cobb-Douglas Exercise

The Supply of Labor: Labor Force Participation. International Labor Force Participation. The Theory of Labor Force Participation for an Individual. The Theory of Labor Force Participation for Groups. Applications of the Theory. Young Workers. Older Male Workers
Women. Race and Residence.

The Supply of Labor: Hours of Work. The History of Working Hours. THE WAY WE WORK: The Good Old Days?. Worker Preferences and Hours Worked. The Theory of Hours of Work for an Individual. Applications of the Theory. Variations on the Wage Line. THE WAY WE WORK: The Great Hours Debate. Welfare Programs and Labor Supply. Some Extensions of the Individual Model. Family Models. Life-Cycle Model. Empirical Evidence on Labor Supply Elasticities.

Human Capital Analysis. Some Background. Education and Age-Earnings Profiles. PUTTING THEORY TO WORK: The Age-Earnings Curve Again. Calculating the Returns to Education. The Net Present Value Approach. The Internal Rate of Return Approach. The Earnings Function Approach. THE WAY WE WORK: What Good Does a Degree Do?. The Evidence. Bias in Rate of Return Estimates. Ability Bias. Selection Bias. Generic versus Specific Human Capital. PUTTING THEORY TO WORK: Forensic Economists and Valuing a Life. Externalities, Equity, and Subsidies. Human Capital and Mobility

Labor Market Equilibrium. Equilibrium in a Single Labor Market. Supply-Demand Models. THE WAY WE WORK: A Strong Market for Economics PhDs in the United States. Empirical Evidence. Equilibrium across Different. Labor Markets. Supply Adjustments. Demand Adjustments. Compensating Differentials. Empirical Studies of Wage Differentials. Interregional Migration and Wage Convergence. AROUND THE WORLD: Labor Mobility in Europe. Compensating Differentials for Job Safety. PUTTING THEORY TO WORK: The Benefits and Costs of Smoking. International Trade and Relative Wages. The Relative Supply-Demand Model. Theories of Trade and Wages. Evidence on Trade and U.S. Wages. PUTTING THEORY TO WORK: U.S. Immigration Policy.

Information and Job Search. The Fixed Sample Search Model. The Sequential Search Model. An Example. A More Formal Model. PUTTING THEORY TO WORK: Search in the Laboratory. Refinements to the Model. Matching Models. Equilibrium Search Models. The Duration of Unemployment and the Hazard Function. AROUND THE WORLD: The Reservation Wage of Polish Job Seekers. Labor Mobility. Job Search Methods and Results. THE WAY WE WORK: Unemployment Benefits and Wage Offers.

Monopsony and Minimum Wages. Wage and Employment Determination under Conditions of Monopsony. Where Does Monopsony Exist?. Geographic Monopsony. Government as a Monopsonistic Employer. The Market for Professional Athletes. Dynamic Monopsony. PUTTING THEORY TO WORK: The Wage Penalty. PUTTING THEORY TO WORK: Is Bigger Better?. Minimum Wages. Empirical Evidence on the Employment Effect of Minimum Wages. The Card-Krueger "Natural Experiment" Study. Other Minimum Wage Studies. Econometric Studies. Other Effects of the Minimum Wage. PUTTING THEORY TO WORK: A Living Wage?.

Chapter 10
Internal Labor Markets. The Characteristics of ILMs. The Importance of Long-Term Employment Relations. Job Hierarchy and Internal Wage Structures. Types of ILMs in the U.S. Economy. The Evolution of ILMs in the United States. The U.S. Labor Market a Century Ago
The Emergence of ILMs. Are ILMs Becoming Less Important? AROUND THE WORLD: The Long-Term Employment Relationship. ILMs and Firm Efficiency. Implicit Contracts. Efficiency Aspects of ILMs. The Case of Academic Tenure. PUTTING THEORY TO WORK: The Stability of Occupational Differentials. Implications of ILMs for Labor Analysis. Wage Determination. Collective Bargaining. Unemployment. Labor Market Segmentation. THE WAY WE WORK: The Labor Market for Temporary Workers.

Personnel Economics. Motivating Worker Effort. Wages and the Supply of Effort. Effort and Output in a Fixed Wage System. Performance Pay. PUTTING THEORY TO WORK: Do Pay Incentives Increase Effort and Productivity?. Difficulties with Implementing Performance Pay. THE WAY WE WORK: You Get What You Pay For. Work-Life Incentive Schemes. Basic Concepts. The Probation Period. Bonuses and Merit Pay. Tournaments and Promotions. PUTTING THEORY TO WORK: Incentives for Poor Performance in Sports. Fringe Benefits. Other Wage Policy Models. Efficiency Wage Theory. Insider–Outsider Models. THE WAY WE WORK: Human Resource Management and Productivity.

Unions and Collective Bargaining. A Profile of Unionism in the United States. Legislation and Labor Union Growth. Unions in the Public Sector. THE WAY WE WORK: Name That Union?. Unionism in Other Countries. Theories of Union Growth. Union Goals and Objectives. Union Monopoly Models. Rent Maximization. Maximization of the Wage Bill. The Median Voter Model. The Utility-Maximization Model. Union Bargaining Power and Strikes. Bargaining Power. THE WAY WE WORK: Boycott!. Models of Strike Activity. The Effects of Unions. Measuring Union Wage Effects: The Problems. Measuring Union Wage Effects: The Methods. The Effects of Unions on Wages. The Effects of Unions on Other Economic Variables.

Labor Market Discrimination. The Many Faces of Labor Market. Discrimination. Gender and Racial Differences in Labor Markets. Gender Differences. THE WAY WE WORK: Women''s Pay and Family Responsibilities. Racial and Ethnic Differences. Theories of Labor Market Discrimination. Personal Prejudice Theory. Statistical Discrimination. Other Models of Discrimination. THE WAY WE WORK: Societal Prejudice at Work?. Measuring the Effect of Discrimination on Pay Gaps. Case Studies. The Earnings Function Approach. Discrimination and the Distribution of Earnings. THE WAY WE WORK: Religious Discrimination and the Irish Troubles. What Does the Research Show? Earnings Gaps. Evidence from Audit Studies. Discrimination in Sports. Anti-Discrimination Policies. The Equal Pay Act. The Civil Rights Act. Discrimination on the Basis of Age and Disability. Affirmative Action
Comparable Worth. The Effects of Anti-Discrimination Policies.

Unemployment. Measures of Unemployment. The Unemployment Rate. Labor Market Flows. The Duration of Unemployment The Unemployment Rate over Time. THE WAY WE WORK: Unemployment among Professional Workers. The Natural Rate of Unemployment. Estimating the Natural Rate. Determinants of the Natural Rate. Changes in the Natural Rate. Fluctuations around the Natural Rate. The Real Business Cycle Model. Wage Rigidity Models. PUTTING THEORY TO WORK: Excess Supply and Salary Offers for PhD Economists. Evidence on Wage Rigidity. The Wage Curve. A Model of the Aggregate Labor Market. AROUND THE WORLD: Unemployment in Eastern Germany. Unemployment Policy: The OECD Jobs Strategy.

Wage Inequality, Income Inequality, and Poverty. Wage Inequality and Labor Market Performance. Measuring Inequality. Percentile Wage. Differentials. The Gini Coefficient. The Variance of the Logarithm of Earnings. Trends in Wage Inequality. International Comparisons. AROUND THE WORLD: Changes in Inequality during Chile''s Economic Miracle. What''s Different about the United States?. Other Aspects of Rising Wage Inequality. Causes of Increased Wage Inequality. A Relative Supply and Demand Model. Causes of Shifts in Demands for Skilled Workers. Causes of Shifts in the Relative Supply of Skilled Workers. Changes in Labor Market Institutions. The Effect of Unemployment Rates. From Wage Inequality to Income Inequality. Earnings Mobility. Measuring Inequality in Living Standards. The Recipient Unit. Trends in Income Inequality. THE WAY WE WORK: Taxes, Transfers, and Inequality. Poverty. The Measurement of Poverty. Poverty Trends in the United States. Poverty in Other Countries. The Feminization of Poverty and the Family Pay Gap. AROUND THE WORLD: The Dynamics of Poverty. Welfare Disincentives and Welfare Reform. Spatial Isolation and Urban Poverty. Policy Options. Keeping Unemployment Low. Increasing the Relative Supply of Skilled Workers. Shifting Demand toward Low-Skill Workers. Increasing Labor Market Access. Maintaining the Real Minimum Wage.


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  • ISBN-10: 1285613244
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