This course begins by describing basic theories of wage growth over the lifecycle. Substantial time will be devoted to human capital theory and its implications for wage growth, income inequality, and government policy. We also consider job matching/search theory, agency theory and models of learning and uncertainty as alternative explanations for individual wage growth. Screening theories of education and occupational choice models are also studied. Next, we explore the market demand for various skills and what that implies for the distribution of earnings in the economy. We examine alternative theories for and evidence of the recent rise in wage inequality.  Finally, we finish the course with a discussion of labor market and human capital policies. What can be done about the declining market for the unskilled? We explore the empirical support for training programs, improving school quality, more generous tuition policies, wage subsidies and the Earned Income Tax Credit, general tax policy, and early childhood intervention programs. We will compare the implications of government policy when incorporating the effects of general equilibrium with those predicted by partial equilibrium analyses. Differences can sometimes be substantial. Throughout the course, we will emphasize the testable implications of various theories and discuss the evidence in support of those theories.

A class presentation, practice referee report, and short paper (5-10 pages) will be required.

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