We develop a model where workers may enter self-employment or search for jobs as employees and where there is heterogeneity across workers' managerial ability. Workers with higher skills will manage larger firms while workers with low managerial ability will run smaller firms and will be in...

We develop a model where workers may enter self-employment or search for jobs as employees and where there is heterogeneity across workers’ managerial ability. Workers with higher skills will manage larger firms while workers with low managerial ability will run smaller firms and will be in...

We examine the optimal labor market-policy mix over the business cycle. In a search and matching model with risk-averse workers, endogenous hiring and separation, and unobservable search effort we first show how to decentralize the constrained-efficient allocation. This can be achieved by a...