This paper describes how imperfect information in both capital and labor markets can, in a context of maximizing firms and perfectly flexible prices and wages, give rise to cyclical variations in unemployment whose character closely resembles that of observed business cycles

Imperfections in risk and capital markets imply that individuals who lose jobs suffer from imperfect smoothing of consumption across states and times. Compared to the first best, there will be too little search. Optimal unemployment programs, which balance the marginal benefit of consumption...

In an earlier paper, we showed that integrated individual accounts, allowing individuals to borrow against future pensions when they are unemployed, can be welfare increasing, because it allows increased inter-temporal consumption smoothing without attenuating incentives to search. Here, we...

We examine how firms' contractual relationships with their employees affect the design of their debt contracts, and their use of financial covenants and pricing grids in particular. Viewing the firm as nexus of both explicit and implicit contractual relationships, we argue that managers...

This paper investigates the impact of private credit contractions on labor market performance. Impulse responses for total, youth, and long-term unemployment are estimated using local projections for a panel of 20 OECD countries over the period 1980-2013. The empirical findings suggest that a...

This paper describes how imperfect information in both capital and labor markets can, in a context of maximizing firms and perfectly flexible prices and wages, give rise to cyclical variations in unemployment whose character closely resembles that of observed business cycles

This paper provides causal evidence on the effect of credit crunches on political polarization. We combine data on bank-firm connections and electoral outcomes at the city-level during the 2008-2014 Spanish Financial Crisis. First, we show that firms in a relationship with weak banks experience...

The worst employment slumps tend to follow the largest expansions of household debt. In this paper, we theoretically investigate an amplification mechanism by which debt on household balance sheets distorts labor market search behavior, leading to deeper employment slumps. Using a competitive...

In an earlier paper, we showed that integrated individual accounts, allowing individuals to borrow against future pensions when they are unemployed, can be welfare increasing, because it allows increased inter-temporal consumption smoothing without attenuating incentives to search. Here, we...