dynamics of inflation implied by macroeconomic data, the model needs to assume an average duration of price contracts which is … perfectly competitive labor market can help resolve the pricing conflict. I do so by assuming search frictions in the labor … market. In this framework, labor becomes firm-specific and marginal cost curves become upward-sloping. This mechanism reduces …

We introduce two types of effort into an otherwise standard labor search model to examine indeterminacy and sunspot … equilibria. Variable labor effort gives rise to increasing returns to hours in production. This makes workers more valuable and … search more intensively in a tighter labor market, which alleviates congestion and reduces the likelihood of indeterminacy …