Recent U.S. evidence suggests that the response of labor share to a productivity shock is characterized by countercyclicality and overshooting. These findings cannot be easily reconciled with existing business cycle models. We extend the Diamond-Mortensen-Pissarides model of search in the labor...

Using U.S. quarterly data we provide VAR evidence showing that a positive productivity shock leads to a persistent decrease in the unemployment rate and in the price markup, together with an increase in aggregate profits. In response to the shock the labor share of income decreases on impact and...

We show how to use Hurwitz polynomials to study the stability and uniqueness of Rational Expectation equilibria in Dynamic General Equilibrium models. We apply this method to a model characterized by staggered wage and price contracts and by limited asset market participation (LAMP). We prove...

We formulate and estimate a business cycle model which can account for key business cycle properties of labor market variables and other aggregates. Three features distinguish our model from the standard model with Search And Matching (SAM) frictions in the labor market: frictional firm entry,...