The potential distortions of job-search incentives caused by unemployment benefits and their financing are well known. However, a benefit-tax scheme also provides insurance having direct utility effects as well as indirect effects on risk taking. The latter mitigates or may even dominate...

In search of a macroeconomic theory of wage determination, the agnostic reader should be puzzled by the apparent contradiction between two influential theories. On one hand, in the standard search-matching theory with wage bargaining, hiring cost and constant returns of labour, the bargaining...

We study the emplyment and distributional effects of regulating (reducing) working time in a general equilibrium model with search-matching frictions. Job creation entails some fixed costs, but existing jobs are subject to diminishing returns. We characterize the equilibrium in the de-regulated...

This paper presents a simple search and bargaining economy in which firms use concave production. Because a firm and worker negotiate over the worker's marginal productivity, the firm's wage is a function of its labour force. Reacting to this wage function, firms choose an excessively large and...