The purpose of this chapter is twofold. First, it reviews the model of search and matching equilibrium and derives the properties of employment and unemployment equilibrium. Second, it applies the model to the study of employment fluctuations and to the explanation of differences in unemployment...

This paper identifies a data-consistent, equilibrium model of unemployment, wage dispersion, quit turnover and firm growth dynamics. In a separating equilibrium, more productive firms signal their type by paying strictly higher wages in every state of the market. Workers optimally quit to firms...