ECON 3039 Labor Economics 2015-16 By Elliott Fan Economics, NTU Elliott Fan: Labor 2015 Fall Lecture 11

ECON 3039

Labor Economics2015-16

By Elliott FanEconomics, NTU

Elliott Fan: Labor 2015 Fall Lecture 1 1

2Elliott Fan: Labor 2015 Fall Lecture 1

Objectives of the course• This course is directed at undergraduate students

• Encourage critical thinking about empirical questions, particularly about the labor economics.

• Equip students with theoretical and empirical tools to identify causal relationship of interest.

• Labor I focuses on research design, while Labor II will aim at fundamental labor economics

Materials• Required Text: Mastering ’Metrics: The Path from Cause to Effect,

by Joshua D. Angrist & Jörn-Steffen Pischke.

• In addition to the textbook, a selected list of journal articles that illustrate the various empirical strategies and methods will be discussing.

• Powerpoint slides, assignments, and other reading materials will be available online: http://homepage.ntu.edu.tw/~elliottfan/labor2015fall.htm

• Most material will be in English, some in Chinese.


http://homepage.ntu.edu.tw/~elliottfan/labor2015fall.htm

http://homepage.ntu.edu.tw/~elliottfan/labor2015fall.htm

About me

Elliott FanAssistant ProfessorEconomics DepartmentNational Taiwan University

• Email: [email protected]• Office hours: Wednesdays 11:10-12 or by appointment• Venue: R859, College of Social Sciences Building


Your teaching assistants

TBA– [email protected]– Office hours: – Venue:


mailto:[email protected]

Course evaluation

Part B: Tasks Weighting (%)

Assignments and participationMidterm examinationFinal examination

303040

TOTAL 100

Note: Except for emergency cases, no special consideration on grading will be granted.


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Course Details

Elliott Fan: Labor 2015 Fall Lecture 1

1. Participation: Attendance and active participation in the lectures is encouraged.

2. As part of the assignments, there will be 3-4 ‘seminar’ lectures in which we will study a paper in detail. For these seminars, a one-page summary of the paper is due at the beginning of class. More detail will be provided.

3. There could be assignments of other forms.

How to get a great mark

• Get involved. Be active and participated.

• Make use of study group.

• Complete everything by yourself.

• Work hard, work smart


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Causal Inference• Causality and correlation

– We believe that most interesting research in social sciences is about cause and effect, why?

– How to identify a causal effect or how to make an causal inference from data analysis lies in the heart of empirical work.

– Causality is the core of this course


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FAQs about empirical research1. What is the causal relationship of interest?

– Policy design

– Prediction

– Interesting how?


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An example – born on the first of September

2. What is the experiment that could ideally be used to capture the causal effect of interest?

– Ideal experiments are most often hypothetical

– FUQs

– Researchers’ imagination helps here


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An example – organs on sale


01

23

4 H

azar

d (o

f 1,0

00)

-40 -20 0 20 40

quarters from age 45

Public Labor Farmer Uninsured

Hysterectomy hazards

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FAQs about empirical research2. What is the experiment that could ideally be used to capture the causal effect of interest?

– Ideal experiments are most often hypothetical

– FUQs

– Researchers’ imagination helps here


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FAQs about empirical research3. What is your identification strategy?

– Randomized control trail (RCT)

– Matching

– Difference-in-difference (DD)

– Instrumental variable (IV)

– Regression discontinuity design (RDD)

4. What is the mode of your statistical inference?– Standard errors


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Causal Inference (methodology)• We start with Garry King’s cereal experiment

– Is iron in cereal the same as iron in nails?

– Gary uses a magnet to suck something out of smashed cereal.

– He then uses the same magnet to try on the same brand of cereal with the same ingredient but iron.


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Causal Inference (methodology)David Hume 1848: “An enquiry concerning human understanding”

Section 7, part 2:

Suitably to this experience, therefore, we may define a cause to be an object, followed by another, and where all the objects similar to the first are followed by objects similar to the second.

• This is the regularity approach to causal inferences.

• Lewis (1973): “I think it is time to give up and try something else.”


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Causal Inference (methodology)David Hume 1848: “An enquiry concerning human understanding”

Section 7, part 2—the *next* sentence:

Or in other words where, if the first object had not been, the second never had existed.

• This is the counterfactual approach to causal inferences.


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Causal Inference (methodology)David Lewis’s (1973) ‘Worlds’ approach

Gylmour (1986) summarizes the approach in this way:

“X causes Y if and only if X is true in the actual world and in the closest (to the actual world) possible world in which X is not true, Y is not true.


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Causal Inference (methodology)Donald Rubin: The ‘statistical approach’

Rubin’s approach:

• It is decisively counterfactual.

• It doesn’t draw on external information (theory)

• It sometimes gets tied up with the method of measurement (i.e. identification).

“No causation without manipulation”

Q: Is there a ‘causal effect’ of being female in this approach?


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Causal Inference (methodology)James J. Heckman and Edward J. Vytlacil (2007) criticism:

Three criticisms:

1. Object of interest can be fanciful; not bound by physical constraints. That’s what models are for.

2. Need to separate object of interest from identification.

3. Theory useful in many ways; should not be jettisoned so lightly.

• Can help formulate hypothesis.

• Can help with strategies for identification.



Example


Example - Their statements• 教育部想著「國際化」，卻不重視國文教育，才讓現在

的年輕人成了「空心世代」。• 搶救國文和每個人都息息相關，家長要了解國文不只是

寫國字，「國文課本讀得愈多，就愈懂得孝順父母、友愛兄弟，搶救國文也是搶救孝順。」

• 搶救國文教育聯盟認為，有第一流的中文能力才能擁有第一流的世界競爭力。

• 呼籲教育部增加國文節數

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駱明慶：經濟學與公共政策1. 首先，我們必須說明「問題是什麼？」2. 其次，我們必須追問，那麼「理想的狀況是什麼？」3. 接下來，嚴肅的政策討論就必須提出能夠解決問題，由「現況」到達

「理想境界」的具體做法，也就是「政策建議」。• 這裡，除了遊說人們「理想境界」的「效益」之外，還必須誠實地

說明所需的「成本」是什麼，以及成本由誰來負擔。• 許多政策的討論就停滯在這裡，以為只要將政策訂在命令或法律中，

人們就會像機器人一般，一個命令一個動作，「理想」世界就會自然到達，而忘了「上有政策、下有對策」的情況，其實是到處都存在的。

• 看到問題，想要解決問題，並透過政府來解決問題，毋寧是相當自然的思考模式。

• 政府直接介入管制常常不是解決問題的有效方法。4. 最後，我們必須追問，在考量了人們的反應之後，新政策的實施，是否

真能導引社會由「現況」向「理想境界」前進。



Example• 問題是什麼？什麼是「空心」？為什麼「空心」是個問題？• 理想的狀況是什麼？人人都懂得讀古文？還是人人都能夠

用中文表情答意？• 由「現況」到達「理想境界」的具體做法是什麼？增加國

文節數就可以達成嗎？ • 「成本」是什麼？哪一門課的時數應該減少？• 需要由政府來解決問題嗎？如果國文那麼重要，為何私人

途徑不可行？• 新政策的實施，是否真能導引社會由「現況」向「理想境

界」前進？

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王符《潛夫論》“ 世有可患者三，三者何？曰情實薄而辭稱厚，念實忽而文想憂，懷不來而外克期 ”

少正卯 : 念實乎而文想憂 -- 思想非常的愚笨，文章卻常常寫得憂國憂民的樣子


People respond to incentives

• Analyzing incentives is the core of microeconomics

• The impacts of a policy depend on how private entities respond to it

• In some extreme cases, policies are 100% neutralized due to private responses.

• Evaluating policy effects is in general not straightforward.


Case I: Strategic Divorce in Spain

• The 2004 changes in Spanish divorce law require only a six-month waiting period in uncontested cases and no separation of living arrangements before the divorce becomes final.

• Preference for a place in good public schools has been given to children of divorced parents.

• Some parents are filing for divorce in January and February.

• The parents re-marry shortly after the child is safely in a desirable school in September.


Case II: Born on the 1st of July

• In May 2004, Australian government announced the Baby Bonus plan to be implemented on 01/07/2004.

• Children born on or after that day are entitled to AU$3,000.

• The cash transfer induced hundreds of parents to schedule planned births from days before 01/07 to days after.

• The same phenomenon happened again on 01/07/2006 when the benefit was raised to $4,000.


Case III: Americans with Disabilities Act (ADA)• The most recent pieces of federal antidiscrimination

legislation are the Americans with Disabilities Act (ADA) and the Civil Rights Act of 1991.

• The ADA requires employers to offer reasonable accommodation to disabled employees and bans discrimination against

• The disabled in wage determination, hiring, and firing.

• Unemployment of the disabled increased as a result.


Lessons learned from these cases

• All programs are benevolence-motivated, but being so guarantees no planned goal.

• Incentives should serve as the most important considerations for policy makers.

• Sometimes it’s take time for individuals to realize where the loopholes are.


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Assignment 1• Pick up an article, in English or Chinese, and write up a

review using Luoh’s protocol. • No more than a page• Due next Wednesday 3:30pm.


Documents

ECON 3039 Labor Economics 2015-16 By Elliott Fan Economics, NTU Elliott Fan: Labor 2015 Fall Lecture 11