We analyze the impact of labor demand and labor market regulations on the corporate structure of firms. We find that higher wages are associated with lower monitoring, irrespective of whether these high wages are caused by labor market regulatio ns, unions or higher labor demand. These...

This paper argues that moderate unemployment insurance not only reduces the uncertainty faced by risk-averse workers but also improves efficiency and raises output. We develop a model in which the decentralized equilibrium is inefficient without unemployment insurance, because the labor market...

In the standard model of human capital with perfect labor markets, workers pay for general training. When labor market feictions compress the structure of wages, firms may invest in the general skills of their employees. The reason is that the d istortion in the wage structure turns...

In market economies, identical workers appear to receive very different wages, violating the "law of one price" of Walrasian markets. We argue in this paper that in the absence of a Walrasian autioneers to coordinate trade": (i) wage dispersion among identical workers is very often an...

During the nineteeth century, most Western societies extended the franchise, a decision which led to unprecedented redistributive programs. We argue that these political reforms can be viewed as strategic decisions by political elites to prevent widespread social unrest and revolution.

This paper offers an alternative theory for the increase in unemployment and wage inequality experienced in the U.S. over the past two decades. In my model firms decide the composition of jobs and then match with skilled and unskilled workers.