Recent empirical evidence suggests that a positive technology shock leads to a decline in labor inputs. However, the standard real business cycle model fails to account for this empirical regularity. Can the presence of labor market frictions address this problem without otherwise altering the...

The literature on unemployment has mostly focused on labor market issues while the impact of capital formation is largely neglected. Job-creation is often thought to be a matter of encouraging more employment on a given capital stock. In contrast, this paper explicitly deals with the long-run...

We present an equilibrium-search model with heterogenous workers whosearch for a job in one of two sectors and who lose part of theirskills during unemployment. We show that an import tariff increasethe wage and the employment prospects in the protected sector. Thisresults in a labor market...

This paper suggests that in the US context, workers tend to invest in general human capital especially since they face little employment protection and low unemployment benefits, while the European model (generous benefits and higher duration of jobs) favors specific human capital investments....