Modern Labor Economics:Theory and Public Policy: International Edition

Ronald G. Ehrenberg / Robert S. Smith
März 2008
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The best-selling Modern Labor Economics provides a clear, comprehensive introduction to labor market behavior. In addition to presenting core theory, Ehrenberg and Smith provide empirical evidence for or against each hypothesis, explore the usefulness of various theories for public policy analysis, and include detailed policy examples in each chapter.

The Tenth Edition incorporates critical developments in the field of labor economics, with new discussions of behavioral economics and immigration as well as a new chapter on international trade and globalization. Review questions appear at the end of each chapter, and problem sets have been expanded to give students ample practice opportunities.


  • Example boxes illustrate each chapter's theory in a nontraditional, historical, business, or cross-cultural setting. These examples look at topics like child labor issues and the bias in selection of musicians by symphony orchestras.
  • Empirical Study boxes at the end of each chapter show how researchers have dealt with various empirical challenges, exposing students to practical discussions such as the problems of simultaneity and “errors in variables” in regression analysis; the issue of unobserved heterogeneity; and the use of “natural,” social, and laboratory experiments.
  • Review Questions and Problems at the end of each chapter allow students to apply what they have learned. Answers for odd-numbered questions and problems are provided at the back of the book.
  • Lists of selected readings refer students to more advanced sources of study.
  • Footnotes cite the most recent literature on chapter topics and are intended as a reference for students and instructors who may want to delve more deeply into a particular topic.

New to this Edition

  • A new chapter-Chapter 16, The Labor Market Effects of International Trade and Production Sharing-discusses international trade and globalization.  
  • New coverage of behavioral economics regarding the household is included in Chapter 7, Labor Supply: Household Production, the Family, and the Life Cycle.
  • Heavily revised immigration coverage reflecting the latest news and data is integrated into Chapter 10, Worker Mobility: Migration, Immigration, and Turnover.
  • Chapter 14, Unemployment, and Chapter 15, Inequality in Earnings, are reversed in order to align with how most syllabi are organized today.
  • Updated data, graphs, and boxed examples throughout bring currency and relevancy to the text.
  • New Problems are added, 3-4 per chapter, to provide new practice opportunities for students.

Table of Contents

Chapter 1 Introduction
The Labor Market
Labor Economics: Some Basic Concepts
Plan of the Text
Appendix 1A Statistical Testing of Labor Market Hypotheses

Chapter 2 Overview of the Labor Market
The Labor Market: Definitions, Facts, and Trends
How the Labor Market Works
Applications of the Theory

Chapter 3 The Demand for Labor
Profit Maximization
The Short-Run Demand for Labor When Both Product and Labor Markets Are Competitive
The Demand for Labor in Competitive Markets When Other Inputs Can Be Varied
Labor Demand When the Product Market Is Not Competitive
Policy Application: The Labor Market Effects of Employer Payroll Taxes and Wage Subsidies
Appendix 3A Graphical Derivation of a Firm's Labor Demand Curve

Chapter 4 Labor Demand Elasticities
The Own-Wage Elasticity of Demand
The Cross-Wage Elasticity of Demand
Policy Application: Effects of Minimum Wage Laws
Applying Concepts of Labor Demand Elasticity to the Issue of Technological Change

Chapter 5 Frictions in the Labor Market
Frictions on the Employee Side of the Market
Frictions on the Employer Side of the Market
Training Investments
Hiring Investments

Chapter 6 Supply of Labor to the Economy: The Decision to Work
Trends in Labor Force Participation and Hours of Work
A Theory of the Decision to Work
Policy Applications

Chapter 7 Labor Supply: Household Production, the Family, and the Life Cycle
The Theory of Household Production
A Labor Supply Model that Incorporates Household Production
Joint Labor Supply Decisions within the Household
Life-Cycle Aspects of Labor Supply

Chapter 8 Compensating Wage Differentials and Labor Markets
Job Matching: The Role of Worker Preferences and Information
Hedonic Wage Theory and the Risk of Injury
Hedonic Wage Theory and Employee Benefits
Appendix 8A Compensating Wage Differentials and Layoffs

Chapter 9 Investments in Human Capital: Education and Training
Human Capital Investments: The Basic Model
The Demand for a College Education
Education, Earnings, and Post-schooling Investments in Human Capital
Is Education a Good Investment?
Appendix 9A A “Cobweb” Model of Labor Market Adjustment
Appendix 9B: A Hedonic Model of Earnings and Educational Level
(Now available exclusively on the Companion Website)

Chapter 10 Worker Mobility: Migration, Immigration, and Turnover
The Determinants of Worker Mobility
Geographic Mobility
Policy Application: Restricting Immigration
Employee Turnover

Chapter 11 Pay and Productivity: Wage Determination Within the Firm
Motivating Workers: An Overview of the Fundamentals
Productivity and the Basis of Yearly Pay
Productivity and the Level of Pay
Productivity and the Sequencing of Pay
Applications of the Theory: Explaining Two Puzzles

Chapter 12 Gender, Race, and Ethnicity in the Labor Market
Measured and Unmeasured Sources of Earnings Differences
Theories of Market Discrimination
Federal Programs to End Discrimination
Appendix 12A Estimating Comparable-Worth Earnings Gaps: An Application of Regression Analysis

Chapter 13 Unions and the Labor Market
Union Structure and Membership
Constraints on the Achievement of Union Objectives
The Activities and Tools of Collective Bargaining
The Effects of Unions
Appendix 13A Arbitration and the Bargaining Contract Zone

Chapter 14 Unemployment
A Stock-Flow Model of the Labor Market
Frictional Unemployment
Structural Unemployment
Demand-Deficient (Cyclical) Unemployment
Seasonal Unemployment
When Do We Have Full Employment?

Chapter 15 Inequality in Earnings
Measuring Inequality
Earnings Inequality Since 1980: Some Descriptive Data
The Underlying Causes of Growing Inequality
Appendix 15A Lorenz Curves and Gini Coefficients

Chapter 16 The Labor Market Effects of International Trade and Production Sharing
Why Does Trade Take Place?
Effects of Trade on the Demand for Labor
Will Wages Converge Across Countries?
Policy Issues


Ronald G. Ehrenberg is the Irving M. Ives Professor of Industrial and Labor Relations and Economics at Cornell University and a Stephen H. Weiss Presidential Fellow. He is also Director of the Cornell Higher Education Research Institute. Ehrenberg received a BA in mathematics from Harpur College (SUNY Binghamton) in 1966 and a PhD in economics from Northwestern University in 1970. As a member of the Cornell faculty for 32 years, he has authored or co-authored over 120 papers, and authored or edited 20 books. He was the founding editor of Research in Labor Economics, and served a ten-year term as co-editor of the Journal of Human Resources. He has been a member of several editorial boards and a consultant to numerous governmental agencies and commissions, as well as numerous universities and private research corporations.

His recent research has focused on higher education issues. Ehrenberg has supervised the dissertations of thirty-nine PhD students and served on committees for countless more. He is also passionate about undergraduate education, involves undergraduate students in his research, and has co-authored papers with a number of these undergraduates. In 2003, ILR-Cornell awarded him the General Mills Foundation Award for Exemplary Undergraduate Teaching. In 2005, he was named a Stephen H. Weiss Presidential Fellow, the highest award for undergraduate teaching that exists at Cornell.

Ehrenberg has served as a consultant to faculty and administrative groups as well as to trustees at a number of colleges and universities on issues relating to tuition and financial aid policies, faculty compensation policies, faculty retirement policies, and other budgetary, planning, and academic issues. Among the institutions he has worked with are Brandeis University, Oberlin College, Northeastern University, the University of North Carolina, the University of Chicago, Vanderbilt University, the U.S. Naval Academy, the National Technical Institute for the Deaf at the Rochester Institute of Technology, Smith College, the Suffolk University Law School, and Albany University (SUNY).

Robert S. Smith, the Associate Dean for Academic Affairs in the School of Industrial and Labor Relations at Cornell University, is also a professor in the school's Labor Economics Department. After receiving his PhD in Economics at Stanford University in 1971, he taught at the University of Connecticut and worked as an economist in the U.S. Department of Labor before coming to Cornell in 1974. He has authored numerous articles in the field of labor economics.

Professor Smith's research interests have centered on analyses of various labor market policies, especially those in the safety and health area. Most recently, he has served as co-principal investigator in the evaluation of the effects of two pilot programs in New York's workers' compensation program: one in the use of managed care and one in the use of alternative dispute resolution structures.

Professor Smith's teaching has included the basic required labor economics courses for undergraduates and for students in the school's professional master's program. In 1999 he received the school's General Mills Foundation Award for Innovation in Instruction.