This paper presents a theory explaining the labor market matching process through microeconomic incentives. There are heterogeneous variations in the characteristics of workers and jobs, and firms face adjustment costs in responding to these variations. Matches and separations are described...

This paper analyzes the role of the extensive vis-à-vis the intensive margin of labor adjustment in Germany and in the United States. The contribution is twofold. First, we provide an update of older U.S. studies and confirm the view that the extensive margin (i.e., the adjustment in the number...

This paper analyzes the role of the extensive vis-à-vis the intensive margin of labor adjustment in Germany and in the United States. The contribution is twofold. First, we provide an update of older US studies and confirm the view that the extensive margin (i.e., the adjustment in the number...

We characterize efficient allocations and business cycle fluctuations in a labor selection model. Due to forward-looking hiring and labor supply decisions, efficiency entails both static and intertemporal margins. We develop welfare-relevant measures of marginal rates of transformation and...

Firms select not only how many, but also which workers to hire. Yet, in standard search models of the labor market, all workers have the same probability of being hired. We argue that selective hiring crucially affects welfare analysis. Our model is isomorphic to a search model under random...

Firms select not only how many, but also which workers to hire. Yet, in standard search models of the labor market, all workers have the same probability of being hired. We argue that selective hiring crucially affects welfare analysis. Our model is isomorphic to a search model under random...

This paper characterizes efficient labor-market allocations in a labor selection model. The model's crucial aspect is cross-sectional heterogeneity for new job contacts, which leads to an endogenous selection threshold for new hires. With cross-sectional dispersion calibrated to microeconomic...