This paper examines a dynamic stochastic general equilibrium (DSGE) model containing exible prices, search frictions and nominal wage contracts. It is assumed that the nominal hourly wage rate and the hours of work are jointly determined, so-called efficient bargaining, for each period. The...

We study the wage growth of job stayers over the business cycle, and show that wage adjustments within a job spell display significant history dependence. This is at odds with the spot market model, which implies that the wage growth of a worker within a job spell depends solely on the change in...

This paper studies the effect mandated severance pay in a matching model featuring wage rigidity for ongoing, but not new, matches and Pareto efficient spot renegotiation of mandated severance pay. Severance pay matters only if real wage rigidities imply inefficient separation under employment...

The conventional search and matching model has been criticized for its inability to explain large cyclical volatility in the vacancy-unemployment ratio without ad hoc assumptions of wage rigidity. This paper presents a mechanism of such volatility without assuming wage rigidity by showing that...

The effects of firing costs crucially depend on the extend to which the additional costs can be shifted to the worker, which refers to the so called "bonding critique". In the recent literature about firing costs, these costs are assumed to be a wasteful tax, such that they can not be shifted to...

In this paper, we implement Bayesian econometric techniques to analyze a theoretical framework built along the lines of Farmer's micro-foundation of the General Theory. Specifically, we test the ability of a demand-driven search model with self-fulfilling expectations to match the behaviour of...

The dynamic general equilibrium model with hiring costs presented in this paper delivers involuntary unemployment in the steady state and involuntary fluctuations in unemploy- ment. After calibrating the model, through simulations we are able to show that our model with labour market...

This paper argues that existing matching models with unemployment as an active search and nonparticipation as an inactive search predict counterfactual results: the unemployment rate is at most two times as volatile as the employmentpopulation ratio; only 20 percent of the actual volatility of...

We apply well-known results of the econometric learning literature to a standard RBC model with unemployment. The unique REE is always expectationally stable with decreasing gain learning, and this result is robust to over-parametrisation of the econometric model relative to the minimum state...

I present a model of optimal contracts between firms and workers, under limited commitment and with worker savings. A central feature of the model is that firms can provide insurance against unemployment, by targeting a path of wages that encourages wealth accumulation. I provide an analytical...