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...

It is often argued that informal labor markets in developing countries promote growth by reducing the impact of regulation. On the other hand informality may reduce the amount of social protection offered to workers. We extend the wage-posting framework of Burdett and Mortensen (1998) to allow...

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...

The continuing adverse labor market effects of the Great Recession have intensified interest in policy efforts to spur job creation. In periods when labor demand and supply are in balance, either hiring credits or worker subsidies can be used to boost employment - hiring credits by reducing...

Matching efficiency is the productivity of the process for matching jobseekers to available jobs. Job-finding is the output; vacant jobs and active jobseekers are the inputs. Measurement of matching efficiency follows the same principles as measuring an index of productivity of production. We...