We provide a simple explanation for the observation that the variance of job destruction is greater than the variance of job creation. In our model profit maximization in the presence of proportional plant-level costs of job creation and destruction implies that shrinking plants are more...

In this paper I evaluate to what extent a real business cycle (RBC) model that incorporates search and leisure decisions can simultaneously account for the observed behavior of employment, unemployment and out-of-the-labor-force. This contrasts with the previous RBC literature, which analyzed...

This paper proposes a methodology for estimating job search models that does not require either functional form assumptions or ruling out the presence of unobserved variation in worker ability. In particular, building on existing results from record- value theory, a branch of statistics that...

This paper extends Hopenhayn and Rogerson's analysis of firing taxes by introducing a flexible form of capital and considering transitionary dynamics. The paper finds that capital is not important for understanding the long run and welfare effects of firing taxes. However, capital is crucial for...

There are significant differences in the dynamics of employment over the business cycle between young and old manufacturing plants. Young plants are more sensitive to aggregate disturbances, and they respond to them along different margins. We interpret these differences as reflecting greater...

Fixed term employment contracts have been introduced in number of European countries as a way to provide flexibility to economies with high employment protection levels. We introduce these contracts into the equilibrium search model in Alvarez and Veracierto (1999), a version of the Lucas and...