This paper explores the decomposition of equilibrium unemployment into involuntary and frictional components using a model that combines efficiency wages with search and matching frictions in the labour market. In deriving our results we generalize the celebrated Solow Condition, expressing the...

This paper analyzes how on-the-job search (OJS) by an agent impacts the moral hazard problem in a repeated principal-agent relationship. OJS is found to constitute a source of agency costs because efficient search incentives require that the agent receives all gains from trade. Further, the...

We study an infinitely repeated principal-agent relationship with on-the-job search. On-the-job search is modeled as a dimension of the agent's effort vector that has no effect on output, but raises his future outside option. The agent's incentives to search are increasing in the degree to which...