-market policy instruments, namely, a vacancy subsidy, a layoff tax and unemployment benefits. The authors derive analytical … that hiring subsidies, layoff taxes and the replacement rate of unemployment insurance should all rise in recessions. The …

links both the cyclical fluctuations and the mean level of unemployment to the aggregate business cycle risk. The key result … of the paper is that business cycles are costly for all consumers, regardless of their wealth, yet that unemployment … fluctuations themselves are not the source of these costs. Rather fluctuations over the cycle induce higher average unemployment …

features of worker flows and job flow simultaneously. In particular, the model correctly predicts that hires from unemployment … hiring flow that does not go through unemployment but is part of job creation, for which procyclicality of the job finding … rate dominates its cyclicality. The authors also show that the model generates large volatilities of unemployment and …