This paper shows analytically and numerically that there are two ways of generating an observationally equivalent comovement between matches, unemployment, and vacancies in dynamic labor market models: either by assuming a standard Cobb-Douglas contact function or by combining a degenerate...

This paper presents a theory explaining the labor market matching process through microeconomic incentives. There are heterogeneous variations in the characteristics of workers and jobs, and firms face adjustment costs in responding to these variations. Matches and separations are described...

This paper shows that the matching function and the Beveridge curve in the United States exhibit strong nonlinearities over the business cycle. These patterns can be replicated by enhancing a search and matching model with idiosyncratic productivity shocks for new contacts. Large negative...

Many workers believe that personal contacts are crucial for obtaining jobs in high-wage sectors. On the other hand, firms in high-wage sectors report using employee referrals because they help provide screening and monitoring of new employees. This paper develops a matching model that can...

A key question in labor market research is how the unemployment insurance system affects unemployment rates and labor market dynamics. We revisit this old question studying the German Hartz reforms. On average, lower separation rates explain 76% of declining unemployment after the reform, a fact...

This paper studies the extent to which the cyclicality of gross and net occupational mobility shapes that of aggregate unemployment and its duration distribution. Using the SIPP, we document the relation between workers' (gross and net) occupational mobility and unemployment duration over the...

In employment relationships, a wage is an installment payment on an implicit long-term agreement between a worker and a firm. The price of labor that impacts firm's hiring decisions, instead, reflects the hiring wage as well as the impact of economic conditions at the time of hiring on future...

We study changes in job security after displacement and exploit eligibility rules for lump-sum payments in the Netherlands to investigate the role of liquid wealth. Within five years of job loss, the likelihood of being in permanent employment remains 12% lower for displaced workers. Those...

This paper analyzes the effect of labor and product market regulation in a dynamic stochastic equilibrium with search frictions. Modeling multiple-worker firms allows us to distinguish between the exit-and-entry (extensive) margin, and the hiring-and-firing (intensive) margin. We characterize...

This article is an idiosyncratic survey of the insider-outsider theory, describing the vision underlying the theory, and evaluating salient contributions to the literature in the light of this vision. We also indicate what appear to have been dead-ends and red herrings in past research. The...