Wage dispersion is generated in a sequential search environment through heterogeneity in firm productivity along with an individual wage-effort trade-off. For a given degree of TFP dispersion, the framework can generate any amount of wage dispersion. Calibrated to generate realistic gains from...

This paper shows how including divisibility of goods and productive heterogeneity leads to the emergence of middlemen in an equilibrium search environment. In the baseline model, middlemen are welfare reducing and their number increases as market frictions are reduced. When the model is extended...

This paper considers the optimal design of unemployment insurance (UI) within an equilibrium matching framework when wages are determined by strategic bargaining. Unlike the Nash bargaining approach, reducing UI payments with duration is welfare increasing. A co-ordinated policy approach,...

This paper considers the effect of monetary policy and inflation on retail markets. It analyzes a model in which: goods are dated and produced prior to being retailed, buyers direct their search on the basis of price and general quality and, buyers' match specific tastes are their private...

In the context of a standard equilibrium matching framework, this paper shows how a duration dependent unemployment insurance (UI) system stabilises unemployment levels over the business cycle. It establishes that re-entitlement effects induced by a finite duration UI program generate...

This paper explores the implications for labor market outcomes of systematic testing of applicants in the hiring process. A matching model in which productivity is a worker's private information is used. Both wages and hiring rates are endogenous. A minority is defined as a group for whom the...

A credit-card acceptance decision by retailers is embedded into a simple model of precautionary demand for money. The model gives a new explanation for how the use of credit-cards can differ so widely across countries. Retailers' propensity to accept cards reduces the need for buyers to hold...