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.

In the course, students will use the knowledge and tools from behavioral economics 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 collaboration between the University of Copenhagen and the Danish Ministry of Employment / STAR.

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.

  • Another possibility is to theoretically analyze the effects of an existing law or regulation in the Danish labor market from a behavioral economics perspective and discuss how existing policy instruments could be improved using behavioral economic insights. As a starting point, students will be provided with examples of policy instruments that have recently been discussed in the Danish Agency for Labour Market and Recruitment.

  • A final possibility is to propose an own empirical investigation on the selected research question. For example, students can propose an empirical design to address their research question with administrative data or newly collected data (using experiments, household surveys, etc.). This is an ideal preparation for subsequently conducting an empirical investigation for a MSc thesis.


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?


MSc programme in Economics

The seminar is primarily for students at the MSc of Economics

Learning outcome

After completing the course, the student should be able to:



  • review and understand recent findings in behavioral economics and how they apply to the labor market.



  • identify the psychological and economics causes of individuals’ behavior in the labor market and analyze the consequences of this behavior for individual and aggregate-level labor market outcomes.



  • apply behavioral economic insights to a question in public policy



Kick-off 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 the course "Foundations of Behavioral Economics" before or in parallel to the seminar. Students will also benefit from previous or concurrent attendance of a MSc-level course on Labour Economics.

Suggestions of dates in the seminar:
• Kick-off meeting: February 7, 2018 10-16 (tbc): Planning meeting and introductory lectures
• February 23: Deadline for handing in project draft, deadline for forming project groups
• February 26/27: meeting to discuss project drafts
• March 01: deadline for handing in commitment paper
• March 23, April 13 (tbc): progress meetings (present preliminary results and discuss open questions regarding the projects with the teacher and the other groups)
• April 25: deadline for uploading paper draft for discussant and workshop
• May 3-4, 9-18h (tbc): Workshop with project presentations

The lectures and the end-of-term workshop will also involve presentations by expert speakers from the Ministry of Employment / STAR (tbc).

7,5 ECTS
Type of assessment
Written examination
- a seminar paper in English that meets the formal requirements for written papers stated in the curriculum and at KUNet for seminars.
Students are allowed (and encouraged) to work in groups of two.
All aids allowed
Marking scale
7-point grading scale
Censorship form
External censorship
Criteria for exam assessment

Students are assessed on the extent to which they master the learning outcome for the seminar and the objectives stated in the Curriculum.

To receive the top grade, the student must with no or only a few minor weaknesses be able to demonstrate an excellent performance displaying a high level of command of all aspects of the relevant material and can make use of the knowledge, skills and competencies listed in the learning outcomes.

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