This paper evaluates the e¤ects of policy interventions on sectoral labour markets and the aggregate economy in a business cycle model with search and matching frictions. We extend the canonical model by including capital-skill complementarity in production, labour mar- kets with skilled and...

In this paper we examine the importance of imperfect competition in product and labour markets in determining the long-run welfare e¤ects of tax reforms assuming agent heterogeneneity in capital hold- ings. Each of these market failures, independently, results in welfare losses for at least a...