This paper investigates the optimal retirement of an individual in the presence of involuntary unemployment risks and borrowing constraints in a complete market with frictions. An intensity model and loading factors are used to illustrate these involuntary unemployment risks and frictions in...

This paper investigates the role that idiosyncratic uncertainty plays in shaping social preferences over the degree of labor market flexibility, in a general equilibrium model of dynamic labor demand where the productivity of firms evolves over time as a Geometric Brownian motion. A key result...

I study the labor market risks associated with being self-employed. I document that the self-employed are subject to larger earnings fluctuations than employees and that they frequently transition into unemployment. Given that the self-employed are not eligible to unemployment insurance, I...

This paper derives optimal employment contracts when workers are risk averse and there are employment and unemployment risks. Without income insurance, consumption rises during employment and falls during unemployment. Optimal employment contracts offer severance compensation and sometimes give...

In this paper, we document that a more generous unemployment insurance (UI) system shifts labor supply from safer to riskier firms and reduces the compensating wage differential that riskier firms are required to pay. Reallocation of labor supply towards riskier firms has real implications for...

The standard literature on working time has modelled the decisions of firms in a deterministic framework in which firms can choose between employment and overtime (given mandated standard hours). Contrary to this approach, we consider the impact of uncertainty and real options on the decision of...

This paper analyzes the joint dynamics of prices, output and employment across firms. We develop a dynamic equilibrium model of heterogeneous firms who compete for workers and customers in frictional labor and product markets. Idiosyncratic productivity and demand shocks have distinct...

I study the effects of fiscal policy responses to aggregate shocks in an economy where households face idiosyncratic unemployment risk in a search and matching (SaM) labor market. By assuming zero liquidity, the households' distribution is degenerate and the model is easily tractable. In the...