Ups and Downs of Career Paths

Seminar 2nd (or higher) semester

Master in International Economics & Public Policy (MIEPP)

Teaching staff: Jean Roch Donsimoni and Klaus Wälde

Seminar announcement

There are many reasons why understanding the determinants of labour supply is important. Reasons include how to design tax schedules or how to formulate labour market policies such as welfare programmes and social insurances. The current view on labour supply dates back to the 1970s, when the life-cycle model of labour supply was …rst developed and replaced the earlier static view of labour supply. The life-cycle approach has introduced a saving and borrowing decision as the central mechanism to introduce dynamics into the standard static model of labour supply. While great advances have been made in the …eld due to this approach, it maintains the assumption of intertemporal separability of leisure and, more importantly, the intertemporal independence of “feeling tired”. That is, the consumption-leisure choice in any period is always a static one. The introduction of savings allows for the price of time at one age to di¤er from the price of time at another age, unless the time preference rate exactly equals the rate of interest on saving and borrowing. Yet, the introduction of savings is not necessarily the only way to create dynamic consumption and hours worked pro…les in the life-cycle model. Indeed, relaxing the assumption of intertemporal separability of leisure naturally changes the price of time at di¤erent ages, whether this depends on past or anticipated hours worked. This approach is particularly relevant to understanding life-cycle behaviour of younger workers and workers who face signi…cant borrowing constraints. Understanding the accumulation of hours worked as fatigue (the feeling of “being tired”), thus increases the realism and potency of labour supply theory. This theme is central to Part I on labour supply theory (see below), and helps us understand how fatigue might in‡uence the career paths of individuals as hours worked accumulate over time.
Going one step further in Part II, one may wonder what the effect of “health”in general is on economic decisions, and not just fatigue. Institutions such as the OECD and the UN regularly publish reports on the importance of health and stress at the economy-level and argue that an improvement in healthcare systems could potentially save millions, sometimes billions, of dollars per year. Economists have long suspected that stress in particular can have signi…cant costs attached to it, and have been attempting to model its development over time and its in‡uence on real economic variables. More generally, the …eld of health economics looks at the in‡uence of various aspects of health on economic decisions; the earliest contribution to the …eld conducted analysis of a "health stock", akin to a capital stock, which a¤ects utility and determines the "demand" for good health. More recent developments have been interested in modelling emotions and mental health into economics as a natural next step in understanding the role of "health" in economic modelling.
Modelling emotions and mental states, however, suggests that it would be useful to understand their psychological foundations. To this end, when looking at the e¤ects of stress and fatigue in the workplace, the natural concept that arises in psychology is that of burnout. This is the objective of Part III. The phenomenon of burnout has been known for over forty years in the psychology literature, with much research being conducted to understand its organisational and social determinants, and to …nd ways to measure it accurately. However, some aspects of it still elude psychologists, such as its development over time and the role of individuals’ decisions in mitigating or fostering its arrival. Some studies have tried to study its evolution over time, surveying the same individuals over periods of several months, but these studies often pursued the traditional view of burnout as an organisational and social phenomenon, rather than one that could be in‡uenced by the individuals concerned. To …ll this gap in the literature, we can model burnout as a state and study its impact on optimal behaviour, and understand how it a¤ects individuals’working decision over time, using tools from mathematics well-known to economists: dynamic programming and phase diagram analysis. This analysis will in turn provide a framework with which we can study the movements of workers as they fluctuate between "ups" (periods with high hours worked) and "downs" (periods where hours worked decrease substantially) throughout their career, and what strategies they can employ to avoid those "downs", a subject of particular importance in modern economies where wages are no longer the only determinants of labour supply and workers increasingly value intellectually satisfying and challenging jobs.

More background on the structure and literature is available here

Time Schedule

* Introductory session (compulsory attendance) and topic assignment: Friday, 4 November, 10.15 a.m. - 11.45 a.m. (room: 01-115 (PC-Lab), old ReWi)

* Submission deadline for seminar papers: Wednesday, 11 January, by 12:00 p.m. (noon).

Please hand in one stapled paper version to Chair`s secretariat (room 01-116, old ReWi) and send a pdf-file by Email to jdonsimo(at)

* Presentations: Wednesday, 18 January

Time: 9 a.m. - tba

Room: RW 6

* Please see our guidelines for seminar participants