Commonly used frictional models of the labor market imply that changes in frictions have large effects on steady state employment and unemployment. We use a model that features both frictions and an operative labor supply margin to examine the robustness of this feature to the inclusion of an...

Standard heterogeneous agent macro models that highlight idiosyncratic productivity shocks do not generate the near zero cross-sectional correlation between hours and wages found in the data. We ask whether matching this moment matters for business cycle properties of these models. To do this we...