We develop an open economy general equilibrium model, with auctionbased directed search unemployment, to study the interactions of trade and unemployment. The theory ascribes all outcomes purely to the fundamentals of technology and endowment. If countries differ by <i>endowment</i>, trade makes both...

We examine the effects of public policy parameters in a simple directed search model of the labour market, and contrast them with those in standard random matching models with Nash bargaining. Both finite and limit versions of the directed search model are considered, and the value of the limit...

The authors develop a model in which the benefit of language acquisition is increasing in the number of individuals who speak the language. This gives rise to a network externality and, if language acquisition is costly, the language acquisition decisions by individuals may be inefficient. If...

We study the implementation of constrained-efficient allocations in labour markets where a basic coordination problem leads to an equilibrium matching friction. We argue that these allocations can be achieved in a non-cooperative equilibrium if wages are determined by ex post bidding. This holds...

The Human Development Index (HDI) is widely used as a measure of wellbeing. We examine the allocations implied by the maximization of this index using a standard growth model. Maximization leads to consumption (excluding education and health expenditures) being pushed to minimal levels. It also...

A dynamic model of intergovernmental competition for a large plant is presented, when local productivity is uncertain. One firm determines the location of its plant in each period by conducting an auction, soliciting bids from local governments. Equilibrium subsidies from the local governments...