The labor market occupies center stage in modern theories of fluctuations. The most important phenomenon to explain and understand in a recession is the sharp decline in employment and jump in unemployment. This chapter for the Handbook of Macroeconomics considers explanations based on frictions...

This paper evaluates the impact of slowing economic growth on labor market dynamism and misallocation. It provides a model of endogenous growth via imitation in a frictional labor market. The framework accounts for rich data on worker job-to-job transitions as well as stochastic and lifecycle...

This paper analyzes a model that features frictions, an operative labor supply margin, and incomplete markets. We first provide analytic solutions to a benchmark model that includes indivisible labor and incomplete markets in the absence of trading frictions. We show that the steady state levels...

Following a recession, the aggregate labor market is slack employment remains below normal and recruiting efforts of employers, as measured by vacancies, are low. A model of matching frictions explains the qualitative responses of the labor market to adverse shocks, but requires implausibly...

We develop a frictional labor market model with multiple regions and heterogeneous firms to study how frictions impeding labor mobility across space affect the joint allocation of labor across firms and regions. Bringing the model to matched employer-employee data from Germany, we find that...

We develop a theory of labor markets with four features: search frictions, worker productivity shocks, wage rigidity, and two-sided lack of commitment. Inefficient job separations occur in the form of endogenous quits and layoffs that are unilaterally initiated whenever a worker's...

Changes in fiscal policy typically entail two kinds of lags: the legislative lag--between when legislation is proposed and when it is signed into law--and the implementation lag--from when a new fiscal law is enacted and when it takes effect. These lags imply that substantial time evolves...

In this lecture, I argue that there are remarkable parallels between how monetary and fiscal policies operate on the macro economy and that these parallels are sufficient to lead us to think about transforming fiscal policy and fiscal institutions as many countries have transformed monetary...

This paper presents new tests of the permanent income hypothesis and other widely used models of household behavior using data from the labor market. We estimate the "excess sensitivity" of job search behavior to cash-on-hand using sharp discontinuities in eligibility for severance pay and...