Seminar: Behavioral Labour Economics: Employment and Public Policy

Course content

In recent years, a growing body of research in Psychology and Economics has demonstrated that individual behavior does not only depend on economic incentives and constraints, but instead is influenced by a multitude of psychological factors as well as by individual limitations in self-control, cognition, and attention. These findings have profoundly shaped the way in which economists and psychologists think about public policy. Since human decision making is ubiquitous in labor markets, labor-market policy is one of the key policy areas where the use of behavioral insights can fundamentally enhance market outcomes.

In this course, we will discuss how research in behavioral economics has enriched our understanding of people’s behavior in the labor market. We will also discuss how a psychologically more accurate understanding of individual behavior can help policy makers develop and apply new policy instruments that effectively make use of behavioral economics insights.

Education

MSc programme of Economics
The seminar is primarily for students at the MSc of Economics

Learning outcome

In the course, students will use the knowledge and tools from behavioral economics research to address a question related to job search, employment, and labor market policy. A list with examples of possible research questions is provided below. In their projects, students can also build on the work in the research unit on "Behavioral Economics and Labor Market Performance" – a newly established collaboration between the University of Copenhagen and the Danish Ministry of Employment.

The project can take various forms:

  • One possibility is to thoroughly analyze and discuss an influential article and derive a policy proposal based on the behavioral phenomenon that is discussed in the article.
  • A second possibility is to conduct an own empirical investigation on the selected question. For this purpose, students will have access to extensive administrative data as well as further data on job seekers' individual characteristics and activities, which will be provided by the Danish Ministry of Employment and the Agency for Labour Market and Recruitment (STAR).
  • Third, students can propose an empirical design that allows to address their research question with newly collected data (using experiments, household surveys, etc.).

 

Examples of possible research questions:

  • How do present-bias and loss aversion affect individuals’ employment and earnings’ prospects?
  • Do job seekers hold systematically biased beliefs regarding their chances of re-employment, prospective wages, and the effectiveness of different search strategies?
  • Which policy tools can help people overcome these biases? Which subgroups of job seekers should we target specifically?
  • How should labor market policies (e.g., the Danish unemployment benefit reform of 2017) be communicated to job seekers? For instance, how does the salience and framing of different reform elements affect individuals' understanding and perception of the policy's underlying incentives?
  • How do default settings in the interaction between job seekers and case workers affect the take-up and adherence to job search & assistance programs?
  • Do case workers in job centers exhibit unconscious biases that might influence the support they give to different groups of unemployed individuals?

 

Course structure:

  • The course will be introduced by 2 lectures in the beginning of the semester, in which we will discuss possible topics for the seminar project and provide an overview of the required theoretical and empirical methods. The lectures and the end-of-term workshop will also involve presentations by expert speakers from the Ministry of Employment / STAR (tbc).
  • Students work on their seminar project (individually or in groups of two), assisted by a number of progress meetings where students can present preliminary results and discuss open questions regarding their projects with the teacher and other project groups.
  • The final results of the seminar projects will be presented and discussed during a two-days workshop at the end of the term.
  • Students are required to write a 12-page paper on their seminar project. A draft of the paper has to circulated 2 weeks before the workshop. The final paper has to be handed in within 2 weeks after the workshop presentations.

Planning/start-up meeting, research and writing process of the seminar paper, sessions with presentation of own paper and critical evaluation/feedback to another student´s paper, actively participating in discussions at class.

Before the session a "so-finalized-as-possible"-draft of the paper must be uploaded in Absalon. After the presentations, the student submit an edited version of the paper in the Digital Exam portal as the final exam paper. The aim is that students use the presentation sessions as an opportunity to receive and use the constructive feedback to improve the paper.

The following surveys give an introduction to the topic. Further references will be provided at the beginning of the course.

  • Babcock, L., W. J. Congdon, L. Katz, and S. Mullainathan (2012): “Notes on Behavioral Economics and Labor Market Policy,” IZA Journal of Labor Policy, 1 (2).

  • DellaVigna, S. (2009): “Psychology and Economics: Evidence from the Field”, Journal of Economic Literature, 47, 315-372.

  • Dohmen, D. (2014): “Behavioural Labour Economics: Advances and Future Directions”, IZA Discussion Paper No. 8263.

Students should have a sound knowledge of microeconomic theory and empirical methods (at a level equivalent to the courses "Microecononics I-III" and "Econometrics I-II" at KU). Although the seminar does not require specific previous knowledge of Behavioral Economics, students will benefit from attending a course on Behavioral Economics before or in parallel to the seminar (e.g., "Foundations of Behavioral Economics", "Pschology of Choice", "Science of Behavior Change"). Students will also benefit from previous or concurrent attendance of a MSc-level course on Labour Economics.

Suggestions of dates in the seminar:
• February 10, 2017: Planning meeting and introductory lectures at 10.00-12.00 and 13.00-15.00
• February 17: Deadline for handing in project draft, deadline for forming project groups
• February 20 (tbc): meeting to discuss project drafts
• March 01: deadline for handing in commitment paper
• March 15, April 05 (tbc): progress meetings
• May 01: deadline for uploading paper draft for discussant and workshop
• May 11-12 (tbc): Workshop with project presentations

ECTS
7,5 ECTS
Type of assessment
Written examination
- seminar paper in English.
Aid
All aids allowed
Marking scale
7-point grading scale
Censorship form
External censorship
- up to 20 % censorship
Criteria for exam assessment

The student must in a satisfactory way demonstrate that he/she has mastered the learning outcome of the course and the objectives stated in the Curriculum.

  • Category
  • Hours
  • Seminar
  • 20
  • Project work
  • 186
  • English
  • 206