2:00 - 3:15 TR

Instructor: Dr. Linda S. Ghent
Phone: 581-6331
Office: 2375 (214A) Coleman Hall
Office Hours: 10:00-12:00 MW
email: mail


At the end of the semester, students should understand how to use economics to solve practical personnel problems such as:

Required Textbook:

Lazear, Edward P. Personnel Economics for Managers. John Wiley & Sons, Inc., 1998.

Grades will be determined using a 10-point scale. There will be no "curve". Final grades for undergraduate students will be comprised of:

Final grades for graduate students will be comprised of:

Please note:
If you have a documented disability and wish to receive academic accomodations, please contact me and the Coordinator of Disability Services (581-6583) as soon as possible.

We will have several homework assignments throughout the semester. These will be given at the end of class and will be due at the BEGINNING of the next class period. If you aren't in class, you need to make sure that you hand in the homework ahead of time. Since we will have many assignments, I will drop your lowest homework grade in determining your final homework average. Therefore, no late homework assignments will be accepted (regardless of whether the absence is excused or not). If you miss class when an assignment is given, it is your responsibility to get a copy of the assignment and complete it by the due date. No late homework assignments will be accepted at any time - no excuses! Should I say it again?

Answers to Homework Problems:

Homework 1

Homework 2

Homework 3

Homework 4

Homework 5

Homework 6

Homework 7

Homework 8

Homework 9

Regular attendance is necessary for you to understand the material covered in this course. While I will not make attendance an explicit part of your grade, I will be keeping track of attendance every day. Keep in mind that it will be used in determining the final grade for a student whose average is near a borderline. I reserve the right to raise or lower your final grade average by 1 to 2 points at the end of the semester based on your attendance record.

All exams will consist of short-answer essay questions and problems. The final exam is NOT cumulative. However, the last unit exam will be given during the final exam time. If you miss an exam and provide me with a legitimate (and properly documented) excuse BEFORE the exam, you will have the option of increasing the weight of your remaining exams, or taking a make-up exam (which must be taken before or during the next class period following the exam). If you miss an exam and do not provide me with a legitimate excuse beforehand, you will receive a grade of zero for that exam.

Exam Dates:
Thursday, February 9th
Thursday, March 23rd
Wednesday, May 3rd (2:45-4:45)

Review Questions for Exam:

Exam 1

Exam 2

Exam 3

Writing Assignments (for Graduate Students only)
Each graduate student is required to choose 5 of the journal articles listed on the syllabus. The student must write a 2-4 page paper summarizing each article and tying it to the material covered in class and the material in the textbook.

Paper Due Dates:
Tuesday, January 31st
Thursday, February 16th
Thursdayday, March 9th
Tuesday, April 4th
Thursday, April 27th

Course Outline (all chapter numbers refer to the Lazear text):

I. Introduction

Key Points:

Chapter 1

Baker, George P., Michael C. Jensen, and Kevin J. Murphy. "Compensation and Incentives: Practice and Theory," The Journal of Finance 43(July 1988), pp. 593-616.

II. Hiring Standards

Key Points:

Chapter 2

Bollinger, Christopher R. and Julie L. Hotchkiss. "The Upside Potential of Hiring Risky Workers: Evidence from the Baseball Industry" Journal of Labor Economics 21(2003), pp. 923-944.

Burgess, Simon, Julia Lane, and David Stevens. "Hiring Risky Workers: Some Evidence," Journal of Economics and Management Strategy 7(Winter 1998), pp. 669-76.

Topel, Robert H. "Factor Proportions and Relative Wages: The Supply-Side Determinants of Wage Inequality," Journal of Economic Perspectives 11(Spring 1997), pp. 55-74.

III. Hiring the Right People

Key Points:

  • self-selection
  • monitoring costs
  • sorting
Chapter 3

Ichino, Andrea and Giovanni Maggi. "Work Environment and Individual Background: Explaining Regional Shirking Differentials in a Large Italian Firm," Quarterly Journal of Economics 115(August 2000), pp. 1057-1090.

Macpherson, David A. and Barry T. Hirsch. "Wages and Gender Composition: Why Do Women's Jobs Pay Less?" Journal of Labor Economics 13(July 1995), pp. 426-71.

IV. Learning a Worker's Productivity

Key Points:

  • who knows what?
  • determining a worker's productivity
  • the assignment problem
  • screening
Chapter 4

Baker, George, Michael Gibbs, and Bengt Holmstrom. "The Internal Economics of the Firm: Evidence from Personnel Data," Quarterly Journal of Economics 109(November 1994), pp. 881-919.

Brown, Charles. "Firms' Choice of Method of Pay," Industrial and Labor Relations Review 43(February 1990), pp. S165-82.

Lazear, Edward P. "Salaries and Piece Rates," Journal of Business 59(July 1986), pp. 405-31.

Wachter, Michael L. and Randall D. Wright. "The Economics of Internal Labor Markets," Industrial Relations 29(Spring 1990), pp. 240-262.

V. Variable Pay or Straight Pay?

Key Points:

  • payment by input vs. payment by output
  • output-based pay
  • time-based pay
  • risk aversion
  • short-run and long-run incentives
Chapter 5

Brown, Charles. "Wage Levels and Methods of Pay," RAND Journal of Economics 23(Autumn 1992), pp. 366-75.

Geddes, Lori A. and John S. Heywood. "Gender and Piece Rates, Commissions, and Bonuses" Industrial Relations 42(July 2003), pp. 419-444.

Hamermesh, Daniel. "12 Million Salaried Workers Are Missing," Industrial and Labor Relations Review 55(July 2002), pp. 649-66.

Matsunaga, Steven R. and Chul W. Park. "The Effect of Missing a Quarterly Earnings Benchmark on the CEO's Annual Bonus," Accounting Review 76(July 2001), pp. 313-32.

Shearer, Bruce. "Piece Rates, Fixed Wages and Incentives: Evidence from a Field Experiment," Review of Economic Studies 71(2004), pp. 513-534.

VI. Human Capital

Key Points:

  • formal schooling
  • on-the-job training
  • legal issues of hiring
Chapter 6

Autor, David H. "Why Do Temporary Help Firms Provide Free General Skills Training?" Quarterly Journal of Economics 116(November 2001), pp. 1409-1448.

Averett, Susan and Sharon Dalessandro. "Racial and Gender Differences in the Returns to 2-Year and 4-Year Degrees," Education Economics 9(December 2001), pp. 281-293.

Barrett, Alan and Philip J. O'Connell. "Does Training Generally Work? The Returns to In-Company Training," Industrial and Labor Relations Review 54(April 2001), pp. 647-62.

Barron, John M, Mark C. Berger, and Dan Black. "Do Workers Pay for On-the-Job Training?" Journal of Human Resources 34(Spring 1999), pp. 235-52.

Hamermesh, Daniel S. and Jeffrey Biddle. "Beauty and the Labor Market," American Economic Review 84(December 1994), pp. 1174-94.

VII. Turnover, Layoffs, and Buyouts

Key Points:

  • is turnover desirable?
  • combining junior and senior workers
  • specific human capital
  • selective layoffs and buyouts
Chapter 7

Becker, Gary S. and Kevin M. Murphy. "The Division of Labor, Coordination Costs, and Knowledge" Quarterly Journal of Economics 107(November 1992), pp. 1137-1160.

Cappelli, Peter. "Why Do Employers Retrain At-Risk Workers? The Role of Social Capital," Industrial Relations 43(April 2004), pp. 421-447.

Elvira, Marta M. and Christopher D. Zatzick. "Who's Displaced First? The Role of Race in Layoff Decisions," Industrial Relations 41(April 2002), pp. 329-61.

Pencavel, John. "The Response of Employees to Severance Incentives," Journal of Human Resources 36(Winter 2001), pp. 58-84.

VIII. Information, Signaling, and Raiding

Key Points:

  • signaling productivity
  • raiding other firms
  • offer matching
Chapter 8

Dale, Stacy Berg and Alan Krueger. "Estimating the Payoff to Attending a More Selective College: An Application of Selection on Observables and Unobservables," Quarterly Journal of Economics 117(November 2002), pp. 1491-1527.

Perri, Timothy J. "Is There a Winner's Curse in the Labor Market?" Journal of Economic Behavior and Organization 28(September 1995), pp. 78-89. (See me for a copy of this article.)

Waldman, Michael. "Up-or-Out Contracts: A Signaling Perspective," Journal of Labor Economics 8(April 1990), pp. 230-51.

IX. Promotions

Key Points:

  • the tournament model
  • the organizational chart
  • absolute and relative performance
Chapter 9

Manove, Michael. "Job Responsibility, Pay, and Promotion," Economic Journal 107(January 1997), pp. 85-103.

Pergamit, Michael R. and Jonthan R. Veum. "What Is a Promotion?" Industrial and Labor Relations Review 52(July 1999), pp. 581-601.

X. Industrial Politics

Key Points:

  • tournaments and competition
  • fairness
  • guaranteed tenure
  • politics in the absence of relative performance
Chapter 10

XI. Seniority-Based Incentive Schemes

Key Points:

  • seniority and incentives
  • work or shirk?
  • upward-sloping earnings profiles
Chapter 11

Ballou, Dale and Michael Podgursky. "Returns to Seniority Among Public School Teachers," Journal of Human Resouorces 37(Fall 2002), pp. 892-912.

Hashimoto, Masanori and John Raisian. "Employment Tenure and Earnings Profiles in Japan and the United States," American Economic Review 75(September 1985), pp. 721-35.

Monks, James and Michael Robinson. "The Returns to Seniority in Academic Labor Markets," Journal of Labor Research 22(Spring 2001), pp. 415-27.

XII. Nonmonetary Compensation

Key Points:

  • monetary equivalents
  • desirable and undesirable job characteristics
  • measurement problems
Chapter 14

French, Michael T. and Laura J. Dunlap. "Compensating Wage Differentials for Job Stress," Applied Economics30(August 1998), pp. 1067-75.

Gariety, Bonnie Sue and Sherrill Shaffer. "Wage Differentials Assicated with Flextime," Monthly Labor Review 124(March 2001), pp. 68-77.

Mathios, Alan D. "Education, Variation in Earnings, and Nonmonetary Compensation," Journal of Human Resources 24(Summer 1989), pp. 456-68.

Ritter, Jospeh A. And Richard Anker. "Good Jobs, Bad Jobs: Workers' Evaluations in Five Countries," International Labour Review 141(2002), pp. 331-58.

XIII. Benefits

Key Points:

  • wages versus benefits
  • cafeteria plans
  • benefits and sorting
  • pension benefits
  • paid time off
Chapter 15

Dorsey, Stuart and David A. Macpherson. "Pensions and Training," Industrial Relations 36(January 1997), pp. 81-96.

Johnson, Nancy Brown and Keith G. Provan. "The Relationship between Work/Family Benefits and Earnings: A Test of Competing Predictions," Journal of Socio-Economics 24(Winter 1995), pp. 571-84.(You can find this article in HTML through the library.)

O'Brien, Ellen. "Employers' Benefits from Workers' Health Insurance," Milbank Quarterly 81(2003), pp. 5-43.