Labor Markets in Developing Countries (Harvard Faculty of Arts and Sciences)





This is an undergraduate course in labor economics. The course teaches core topics in the field of labor economics applied to developing countries as well as empirical methods for applied microeconomic analysis.

Labor markets are important, because most people, especially the poor, derive all or most of their income from the work they do. Therefore, labor is an important asset of poor households. Labor markets in developing countries exhibit several interesting stylized facts: a substantial fraction of the poor act as entrepreneurs,  frequent temporary migration for work, lack of specialization, the businesses of the poor typically operate at remarkably small scale. This course will explore various microeconomic explanations for these phenomena.

On a macro level, the gap between rich and poor countries has grown over the past century. A hundred years ago, the wealthiest country was 11 times richer (in per capita income) than the poorest country. By 2012, the ratio of wealth of the richest to the poorest country had grown from 11 to 300. This increase in inequality is a distressing outcome for a globe that seems smaller every day; it is particularly distressing for countries that form the denominator of that wealth ratio. Is this likely to get worse? What can be done to raise the income levels of the poorest countries?

Policy prescriptions for the poorest nations are often contradictory. Although providing more employment should alleviate poverty, there is no clear consensus regarding the best policies for expanding employment opportunities in developing countries. Some argue that labor market regulations are necessary to protect the rights of workers and to improve working conditions. Others point out that most regulations discourage firms from hiring workers and thus have the unintended consequence of harming the very people they are designed to protect. Moreover, in developing countries, massive noncompliance is the norm, and regulations like a national minimum wage could simply encourage the expansion of an informal market, where wages are even lower and working conditions even worse.

The course, intended as a broad survey of labor economics, will focus on microeconomic approaches to understanding labor issues pertinent to households, markets and institutions in developing countries. For each of topic covered in the course, we will pay special attention to the identifying causal effects that inform the design of public policies, and contrast the lessons learned from this approach to those obtained from observational studies.

nikolovecon970_spring_2013_april11.pdf142 KB