We introduce two types of effort into an otherwise standard labor search model to examine indeterminacy and sunspot equilibria. Variable labor effort gives rise to increasing returns to hours in production. This makes workers more valuable and contributes to self-fulfilling profit expectations,...

This paper addresses the large degree of frictional wage dispersion in US data.The standard job matching model without on-the-job search cannot replicate thispattern. With on-the-job search, however, unemployed job searchers are more willingto accept low wage offers since they can continue to...

This paper addresses the large degree of frictional wage dispersion in US data. The standard job matching model without on-the-job search cannot replicate this pattern. With on-the-job search, however, unemployed job searchers are more will- ing to accept low wage offers since they can continue...