We find that the main featues of labor policy across OECD countries can be explained by an equilibrium search model with risk neutral agents and a government that chooses policy to maximize a social welfare function. Optimal policy redistributes income from advantaged to disadvantaged workers. A...

Shimer (2005) showed that a standard search and matching model of the labor market fails to generate fluctuations of unemployment and vacancies of the magnitude observed in US data in response to shocks to average labor productivity of plausible magnitude. He also suggested that wage...

In a frictional labor market, when an employee receives an outside offer, his employer is naturally tempted to compete to retain him. Casual observation in the labor market, however, suggests that this type of ex post competition is rare. As a consequence, employers often let valuable employees...

We argue that the main difference between European and American labor markets is not so much in the unemployment rates, but maybe more importantly in the reduced flows into and out of unemployment, in Europe. Employment protection legislations (EPL) have been extensively studied in the...

The question of how technological change affects labor markets is a classical one in macroeconomics. A standard framework for addressing this question is the matching model with vintage capital and exogenous technical progress. Within this framework, it has been argued that the impact of...