In this paper we show how imperfect memory can imply a preference for increasing payments. We model an agent making a decision regarding effort in two periods where the cost of effort is imperfectly known. Before making the first decision, the agent receives a signal related to the cost of...

We analyze how wage setting institutions and job-security provisions interact on unemployment. The assumption that wages are renegotiated by mutual agreement only is introduced in a matching model with endogenous job destruction – la Mortensen and Pissarides (1994) in order to get wage...

It is frequently argued that pure government-mandated severance transfers by the employer to the worker have neither employment nor welfare effect because they can be offset by private transfers from the worker to the employer. In this paper, using a dynamic search and matching model a la...