Commonly used frictional models of the labor market imply that changes in frictions have large effects on steady state employment and unemployment. We use a model that features both frictions and an operative labor supply margin to examine the robustness of this feature to the inclusion of a...

We develop a simple model featuring search frictions and a nondegenerate labor supply decision along the extensive margin. The model is a standard version of the neoclassical growth model with indivisible labor with idiosyncratic shocks and frictions characterized by employment loss and...

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...

We analyze a Bewley-Huggett-Aiyagari incomplete-markets model with labor-market frictions. Consumers are subject to idiosyncratic employment shocks against which they cannot insure directly. The labor market has a Diamond-Mortensen-Pissarides structure: firms enter by posting vacancies and match...

This paper examines the causes of observed increase in the duration of unemployment relative to the unemployment rate in the Post-War United States. First we analyze if changes in the demographic composition of U.S. labor force can explain the change in the structure of unemployment duration. In...

We introduce a joint model of labor market search and firm size dynamics to explain the differential in labor market and productivity outcomes between the U.S. and the European Union. At the core, our model is a hybrid of the labor market search model by Mortensen and Pissarides (1994) and the...

This paper examines how policies affect people's welfare during business cycles when markets are incomplete. In particular, we analyze cyclical policies such as cyclical taxation and cyclical unemployment insurance. Those policies play two roles: smoothing the income (and consumption) process...

Since the end of the Great Recession in mid-2009, the unemployment rate has recovered slowly, falling by only one percentage point from its peak. We find that the lackluster labor market recovery can be traced in large part to weakness in aggregate demand; only a small part seems attributable to...

We provide a set of comparable estimates for the rates of inflow to and outflow from unemployment for fourteen OECD economies using publicly available data. We then devise a method to decompose changes in unemployment into contributions accounted for by changes in inflow and outflow rates for...

From the perspective of a wide range of labor market outcomes, the recession that began in 2007 represents the deepest downturn in the postwar era. Early on, the nature of labor market adjustment displayed a notable resemblance to that observed in past severe downturns. During the latter half of...