AØKK08358U Seminar: Behavioral Labour Economics: Employment and Public Policy

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?