We analyze a general search model with on-the-job search and sorting of heterogeneous workers into heterogeneous jobs. This model yields a simple relationshipbetween (i) the unemployment rate, (ii) the value of non-market time, and (iii) themax-mean wage differential. The latter measure of wage...

The negative relationship between the unemployment rate and the job openings rate, known as the Beveridge curve, has been relatively stable in the U.S. over the last decade. Since the summer of 2009, in spite of firms reporting more job openings, the U.S. unemployment rate has not declined in...

Do firms have the right incentives to innovate in the presence of productivity spillovers? This paper proposes an explicit model of spillovers through labor flows in a framework with search frictions. Firms can choose to innovate or to imitate by hiring a worker from a firm that has already...

In this note I argue that the desirability of fiscal policy in response to the current crisis depends on whether one views the current crisis as a temporary deviation from a unique equilibrium or as a bad equilibrium out of multiple equilibria. The paper presents a simple Diamond (1982) type of...

This paper investigates the age-dependency of participation andunemployment by integrating job search with intertemporal optimizing behaviorof finitely-lived households. We find that search frictions and tax ratesdistort the decisions of older workers to a much larger extent than that ofyoung...

We develop an urban-search model in which firms post wages. When all workers are identical, the Diamond paradox holds, i.e. there is a unique wage in equilibrium even in the presence of search and spatial frictions. This wage is affected by spatial and labour costs. When workers differ according...

The Nash wage bargaining model is ubiquitous in modern labour economics. Yet most applications of this model ignore inter-employer competition for labour services and attribute all of the workers’ rent to their bargaining power. In this Paper, we write and estimate an equilibrium model with...

Investment in inventories is known to be important for observed changes in GDP. However, inventory investment and the possibility that firms may fail to sell all goods are typically ignored in business cycle models. Using US data, the ability to sell is shown to be strongly procyclical. By...