This paper studies optimal UI policy from the perspective of worker assignment to heterogenous jobs in an environment of random matching. Workers react to UI policy through job acceptance decisions; firms react to UI policy through wage posting. There is endogenous assortative matching as a...

There is a growing belief that the recession has run its course and that the goods market has started a period of slow, but sustainable, recovery. Improvement in the labor market may take some time, but many believe that unemployment will return to its 2007 level in the medium term. In this...

This paper provides a novel justification for a declining time profile of unemployment benefits that does not rely on moral hazard or consumption-smoothing considerations. We consider a simple search environment with homogeneous workers and low- and high-productivity firms. By introducing a...

Central bankers are raising interest rates on the assumption that wage-push inflation may lead to stagflation. This is not the case. Although unemployment is low, the labor market is not 'tight'. On the contrary, we show that what matters for wage growth are the non-employment rate and the...

Unemployment is notoriously difficult to predict. In previous studies, once country and year fixed effects are added to panel estimates, few variables predict changes in unemployment rates. Using panel data for 29 European countries collected by the European Commission over 444 months between...

The paper explores the consequences of macroeconomic policy for labor market outcomes in the presence of frictions. It shows how policy may be useful in overriding frictions, as well as how it might generate adverse outcomes. The analysis looks at the main tools of macroeconomic policy and...

Most economists maintain that the labor market in the United States (and elsewhere) is 'tight' because unemployment rates are low and the Beveridge Curve (the vacancies-to-unemployment ratio) is high. They infer from this that there is potential for wage-push inflation. However, real wages are...