lack of compensating differentials for unemployment risk can arise in equilibrium when all workers are identical and firms … differ only in job security (i.e. the probability that the worker is not sent into unemployment). In a setting where workers … depends on the behavior of all firms in the labor market and increases with the rent the employing firm leaves to the worker …

We build an analytically and computationally tractable stochastic equilibrium model of unemployment in heterogeneous … labor markets. Facing search frictions within markets and reallocation frictions between markets, workers endogenously … countercyclical unemployment, and is simultaneously consistent with procyclical reallocation, countercyclical separations and a …