This paper examines the effects of various labor market institutions on the welfare of workers and employers. We consider self-enforcing contracts between risk-averse workers and risk-neutral employers in a labor market with search frictions. Employers promise to smooth out shocks to wages while...

We study the role of search efficiency on wage dynamics and welfare. There are two sectors in the economy: a risk-free sector that employs workers only, and a risky sector with matching frictions that employs both workers and employers. Workers are risk-averse, whereas employers are...