Over the business cycle, labor's share of output is negatively but weakly correlated with output, and it lags output by about four quarters. Profits' share is strongly pro-cyclical, it neither leads nor lags output, and its volatility is about four times that of output. Despite the importance of...

This paper constructs a theory of the coexistence of fixed-term and permanent employment contracts in an environment with ex-ante identical workers and employers. Workers under fixed-term contracts can be dismissed at no cost while permanent employees enjoy labor protection. In a labor market...