This paper presents a model in which firms and workers must engage in costly search to find a production partner. In this setting the skill, job and wage distributions and their evolutions are endogenized. The presence of search frictions implies that there are two redistributive forces in the...

A natural holdup problem arises in a market with search frictions: firms have to make a range of investments before finding their employees and larger investments translate into higher wages. In particular, when wages are determined by ex post bargaining, the equilibrium is always inefficient:...