Starting in the 1970's, wage inequality and the number of hours worked by employed U.S. prime-age male workers have both increased. We argue that these two facts are related. We use a labour market model with on-the-job search where by working longer hours individuals acquire greater skills....

Starting in the 1970's, wage inequality and the number of hours worked by employed U.S. prime-age male workers have both increased. We argue that these two facts are related. We use a labour market model with on-the-job search where by working longer hours individuals acquire greater skills....

In this paper we study how a benevolent government that cannot commit to future policy should trade off the costs and benefits of public expenditure. We characterize and solve for Markov-perfect equilibria of the dynamic game between successive governments. The characterization consists of an...

In this paper we study how a benevolent government that cannot commit to future policy should trade off the costs and benefits of public expenditure. We characterize and solve for Markov-perfect equilibria of the dynamic game between successive governments. The characterization consists of an...