Labor Economics: some Empirical papers with econometric topics

1. Practical issues on randomized controlled trials (RCT)
– Bertrand, M. and S. Mullainathan (2004). Are Emily and Greg More Employable Than
Lakisha and Jamal? A Field Experiment on Labor Market Discrimination.; American Economic Review 94(4): 991-1013.
– Kling, J. R., et al. (2007). ;Experimental Analysis of Neighborhood Effects.; Econometrica 75(1): 83-119.

2. Observation units and clustering standard errors / matching estimation
HME C7, 3.3.
– Marianne Bertrand & Esther Duflo, Sendhil Mullainathan, 2004. How Much Should We Trust Differences-in- Differences Estimates? The Quarterly Journal of Economics, vol. 119(1), pages 249-275

(Clustered Standard Errors / Robust and Clustered Standard Errors /  Introduction to Robust and Clustered Standard Errors /  A practitioner’s guide to cluster-robust inference AC Cameron, DL Miller – Journal of Human Resources, 2015 / Analysis of a cluster-randomised trial in education)
(Matching Estimators / A Practical Guide to Implementing Matching Estimators 1999/ Matching Estimators Petra E. Todd 2006/ Matching methods for causal inference: A review and a look forward EA Stuart – Statistical science, 2010)

3. Instrumental variables method
– Autor, D. H., et al. (2013). ;The China Syndrome: Local Labor Market Effects of Import
Competition in the United States. American Economic Review 103(6): 2121-2168. ***
– Kling, J. R., et al. (2007). ;Experimental Analysis of Neighborhood Effects.; Econometrica 75(1): 83-119.
– Kondo, A. (2007). Does the first job really matter? State dependency in employment
status in Japan. Journal of the Japanese and International Economies 21(3): 379-402

(Instrumental Variables and Selection Bias / Nonparametric IV Estimation of Local Average Treatment Effects with Covariates / Treatment Effects – MIT Economics )

3. IV&Fixed effects
– von Wachter, T. and S. Bender (2006). In the Right Place at the Wrong Time: The Role of Firms and Luck in Young Workers’ Careers. American Economic Review 96 (5): 1679- 1705. ***

(Fixed Effects Models)

4. Differences in differences and applications
Method:  Petra Todd (1999) “A practical guide to implementing matching estimators”
– Eissa, N. and J. B. Liebman (1996). Labor Supply Response to the Earned Income Tax Credit. The Quarterly Journal of Economics 111(2): 605-637.
– Duflo, E. (2001). Schooling and Labor Market Consequences of School Construction in Indonesia: Evidence from an Unusual Policy Experiment. American Economic Review
91(4): 795-813.
– García-Gómez, P., et al. (2013). Long-Term and Spillover Effects of Health Shocks on Employment and Income.Journal of Human Resources 48(4): 873-909.

(Panel Data: Fixed Effects and Differences in Differences Differences-in-Differences / Difference-in-Differences Estimation / Question 1 / Question 2)

5. Regression Discontinuity Design
Method: Lee, D. S. and T. Lemieux (2010). Regression Discontinuity Designs in Economics.Journal of Economic Literature 48(2): 281-355.
– McCrary, J. and H. Royer (2011).The Effect of Female Education on Fertility and Infant Health: Evidence from School Entry Policies Using Exact Date of Birth. Am Econ Rev 101(1): 158-195.
– Dahl, G. B., et al. (2014). Peer Effects in Program Participation.; American Economic Review 104(7): 2049-2074. ***

6. Sample selection bias and its corrections
Method:  Cameron, A. Colin and Pravin K. Trivedi, 2005. Microeconometrics, Cambridge
University Press. Ch. 16.5.
– Lee, D. S. (2009). Training, Wages, and Sample Selection: Estimating Sharp Bounds on
Treatment Effects. The Review of Economic Studies 76(3): 1071-1102.

(Applied Econometrics Lecture 15: Sample Selection Bias Estimation of Nonlinear Models with Panel Data / Detecting and Statistically Correcting Sample Selection Bias / What is the difference between “treatment endogeneity” and “sample selection bias”? / SAMPLE SELECTION BIAS )

7. Binary Choice Models

(Applied Econometrics Lecture 10: Binary Choice Models / Models for Binary Choices: Linear Probability Model / Lecture 9: Logit/Probit / DISCRETE CHOICE / Binary Choice Models)


IV: Autor, D. H., et al. (2013). ;The China Syndrome: Local Labor Market Effects of Import
Competition in the United States. American Economic Review 103(6): 2121-2168.

Debate on the impact of international trade on domestic labor market:
rising US wage inequality since 1990
→ a) foreign outsourcing affect skilled manufacturing labor → (trade theory) low-wage countries could disrupt high-wage labor market ← owing to China economic growth  historically low imports from low-wage countries rose markedly → meet with a decline of US working-age population in manufacturing + US current-account deficit equal to China surplus => increasing import competition from China without increasing export demand
→ b) other shocks like skill biased technical change changed wage structure

Test: local labor market → subeconomies with various initial patterns of industry
(importance of different manufacturing industries for local employment → employment share of manufacturing + different degrees of import competition given manufacturing specialization in industries / e.g. labor market reliance on labor-intensive industries suffer given to China’s comparative advantage ) → differ in exposure to import competition

reform-induced changes: internal supply shocks from productivity growth(>demand side shock) + falling global trade barriers → instrument for the growth in US imports from China using Chinese import growth in other high-income markets

Degrees-of-freedom problem
Trade shocks play out in general equilibrium → aggregate many industry-specific shocks → national labor markets at annual frequencies → degrees-of-freedom problem =>
1] GE between changes in product prices and factor price → changes in wages for skilled and unskilled labor ← limited on non-wage outcomes like employment status
2] treat industry or occupation as unit of analysis:
Much previous research has studied the effects of imports on manufacturing firms or employees of manufacturing industry
3] taking regional economies(local labor market approach) as the unit of analysis (complementary to 2) → capture both direct effect of trade shocks (changes in exposure to low-i-c imports according to initial patterns of industry specialization) on employment and wage + net effects on employment, wage, labor force participation, geographic mobility, take-up of public transfer benefits in the surrounding geographic area

(extends the analysis of the consequences of trade beyond wage and employment changes in manufacturing – relate changes in manufacturing and nonmanufacturing employment, earnings, and transfer payments across US local labor markets to changes in market exposure to Chinese import competition)

(mobility is low for manufacturing workers → effects of trade shocks on regional labor markets over medium term ← find no significant population adjustments)

General Results
labor-market adjustments to trade (missed by previous literature):
1] local labor markets with high exposure to Chinese import growth increased unemployment, decreased labor-force participation, lower wage and increased use of disability and other transfer benefits
1.1] reductions in both employment and wage levels lead to a steep drop in the average earning → contribute to rising transfer payments through multiple federal and state programs:
a) largest transfer increases are for federal disability, retirement, and in-kind medical payments;
b) unemployment insurance and income assistance significant but secondary;
c)Trade Adjustment Assistance (TAA) for trade shocks however a negligible part of the trade-induced increase 

→ revealing an important margin of adjustment to trade that has been overlooked 
2] exposure to Chinese import competition (i.e. import shocks) affects local labor markets not just through manufacturing employment → but also trigger a decline in wages that is primarily observed outside of the manufacturing sector
3] Theory suggests trade with China yields aggregate gains for the US economy ← highlights the distributional consequences of trade and the medium-run efficiency losses associated with adjustment to trade shocks



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