This paper considers a dynamic matching model with imperfectly observable worker effort. In equilibrium, the wage distribution is truncated from below by a no-shirking condition. This downward wage rigidity induces the same type of inefficient churning and "contractual fragility" as in Ramey and...

In a search and matching environment, this paper assesses a range of modeling setups against macro evidence for the monetary transmission mechanism in the euro area. In particular, we assess right-to-manage vs. efficient bargaining, flexible vs. sticky wages, interactions at the firm level...

Excessive levels of firing costs have been consistently blamed for the relatively weak employment in Europe, yet the concusions to be drawn from the literature are somewhat ambiguous. The paper re-examines the impact of adjustment costs under uncertainty.

This paper studies the effect of labor market reform, in the form of reductions in firing costs and unemployment benefits, on inflation volatility. With this purpose, we build a New Keynesian model with search and matching frictions in the labor market, and estimate it using Euro Area data....

In light of the huge cross-country differences in job losses during the recent crisis, we study how labor market duality - meaning the coexistence of "temporary" contracts with low firing costs and "permanent" contracts with high firing costs - affects labor market volatility. In a model of job...

We study simple fiscal rules for stabilizing the government debt level in response to asymmetric demand shocks in a country that belongs to a currency union. We compare debt stabilization through tax rate adjustments with debt stabilization through expenditure changes. While rapid and flexible...

Taking into account two salient Spanish stylized facts, namely, a persistent disinflationary process and hysteresis in the unemployment, this paper tries to answer the following question: Is a nominal permanent disinflation compatible with short-run unemployment costs but also with long-run...

The co-movements of labor productivity with output, total hours, vacancies and unemployment have changed since the mid 1980s. This paper offers an explanation for the sharp break in the fl uctuations of labor market variables based on endogenous labor supply decisions following the mortgage...

This paper examines the effects of transitory skill mismatch in a matching model with heterogeneous jobs and workers. In our model, some high-educated workers may accept unskilled jobs for which they are over-qualified but are allowed to engage in on-the-job search in pursuit of a better job. We...