This chapter assesses how models with search frictions have shaped our understanding of aggregate labor market outcomes in two contexts: business cycle fluctuations and long-run (trend) changes. We first consolidate data on aggregate labor market outcomes for a large set of OECD countries. We...

This paper uses the Italian Social Security employer-employee panel to study the effects of the Italian reform of 1990 on worker and job flows. We exploit the fact that this reform increased unjust dismissal costs for firms below 15 employees, while leaving dismissal costs unchanged for bigger...

The theory of the dynamics of labor demand is based either on the costs of adjusting the level of employment or on the costs of hiring or firing (of gross changes in employment). We write down a generalized cost of adjustment function that includes both types of cost and allows for asymmetries...

We study the general equilibrium effects of social insurance on the transition in a model in which the process of moving workers from matches in the state sector to new matches in the private sector takes time and involves uncertainty. We find that adding social insurance may slow transition....

This paper uses the "Encuesta de Condiciones de Vida Y Trabajo" (EGVT) -- a survey of the labor force activity of over 61,000 persons in Spain in 1985 when unemployment exceeded 20%--to examine the effect of unemployment insurance (UI) and family status on long-run joblessness. It finds that (1)...

This paper argues that a broad class of search models cannot generate the observed business-cycle-frequency fluctuations in unemployment and job vacancies in response to shocks of a plausible magnitude. In the U.S., the vacancy-unemployment ratio is 20 times as volatile as average labor...

Reemployment bonus experiments offer large lump sum payments to unemployment insurance (UI) recipients who find a job quickly. Such experiments are underway or have been recently completed in four states. This paper analyzes the results from Illinois and discusses the implications of the...

In the last two decades, U.S. policies have moved from the use of incentives to the use of sanctions to promote work effort in social programs. Surprisingly, except for anecdotes, there is very little systematic evidence of the extent to which sanctions applied to the abusive use of social...

A search-theoretic general equilibrium model of frictional unemployment is shown to be consistent with some of the key regularities of unemployment over the business cycle. In the model the return to a job moves stochastically. Agents can choose either to quit and search for a better job, or...

This paper explains upward job mobility and observed patterns of unemployment by skill as an economy recovers from a recession. Skilled unemployment is due to rational waiting by workers looking for long-term jobs when there is a "lock-in" effect. Lock-in occurs if the conditions in the labor...