The labor search and matching model plays a growing role in macroeconomic analysis. This paper provides a critical, selective survey of the literature. Four fundamental questions are explored: how are unemployment, job vacancies, and employment determined as equilibrium phenomena? What...

The Story of the Hats is a puzzle in social epistemology. It describes a situation in which a group of rational agents with common priors and common goals seems vulnerable to a Dutch book if they are exposed to different information and make decisions independently. Situations in which this...

This paper focuses on an econometric investigation of the macroeconomic and political factors that contributed to Greece’s excessive debt accumulation and its failure to adequately address its fiscal imbalances, from the restoration of democracy in 1974 till the crisis of 2009. The econometric...

This paper develops a new framework for examining the distributional consequences of international trade that incorporates firm and worker heterogeneity, search and matching frictions in the labor market, and screening of workers by firms. Larger firms pay higher wages and exporters pay higher...

European regions have experienced a polarisation of their unemployment rates between 1986 and 1996, as regions with intermediate rates have been driven by changes in regional employment, only partly offset by labour force changes. Regions'' outcomes have closely followed those of neighbouring...

Labor market institutions, via their effect on the wage structure, affect the investment decisions of firms in labor markets with frictions. This observation helps explain rising wage inequality in the US, but a relatively stable wage structure in Europe in the 1980s. These different trends are...

Theoretical predictions of the effect of TFP growth on employment are ambiguous, and depend on the extent to which new technology is embodied in new jobs. We estimate a model for employment, wages and investment with an annual panel for the United States, Japan and Europe and find that TFP...

This paper tests whether aggregate matching is consistent with unemployment being mainly due to search frictions or due to job queues. Using U.K. data and correcting for temporal aggregation bias, estimates of the random matching function are consistent with previous work in this field, but...

This paper derives optimal employment contracts when workers are risk averse and there are employment and unemployment risks. Without income insurance, consumption rises during employment and falls during unemployment. Optimal employment contracts offer severance compensation to smooth...

This article develops a model of unemployment fluctuations. The model keeps the architecture of the general-disequilibrium model of Barro and Grossman (1971) but takes a matching approach to the labor and product markets instead of a disequilibrium approach. On the product and labor markets,...