This paper shows that the standard Mortensen-Pissarides framework embedded in a RBC macroeconomic model with risk averse agents, capital and a labor-leisure choice has the ability to match all moments of the ac- tual US-unemployment rate and other labor market variables within tight bounds when...

This paper considers a dynamic matching model with imperfectly observable worker effort as in Shapiro and Stiglitz (1994). In our economy the no-shirking condition endogenously imposes real wage rigidity on the matching market. This generates "contractual fragility" and inefficient separations...

This paper develops and solves a general equilibrium business cycle model with on-the-job search and wage rigidity arising from long-term labor contracts. Labor search models without these features have been criticized for failing to generate procyclical movements in job vacancies and...

This paper studies the implications of labor taxation in determining the sensitivity of an economy to macroeconomic shocks. We construct a New Keynesian business cycle model with matching frictions of the labor market, where sluggish employment adjustment implies a key role for labor markets in...

Standard business cycle models often have difficulty matching salient stylized facts such as hump-shaped responses to shocks or persistence. This is mainly due to the lack of a strong endogenous propagation mechanism. In this paper we demonstrate that a real business cycle with a labor market...

Incorporating labor market search in general equilibrium models has been shown to generate realistic dynamics in employment, job creation, and job destruction and to increase the magnitude and persistence of the impact of productivity shocks on output. This paper studies the extent to which the...

This paper reevaluates the quantitative performance of the standard labor-market matching model developed by Mortensen and Pissarides with special attention to the behavior of vacancies, one of the key variables in the model. I first estimate trivariate vector autoregressions with gross worker...