of large flows between employment, unemployment and inactivity. Secondly, it shows that unemployment and aggregate wages …This paper explicitly differentiates between unemployment and inactivity, by defining inactivity as a state in which … labor market states. In steady-state, we hence have a theory of equilibrium unemployment determined by both matching …

unemployment volatility puzzle (Shimer, 2005). Moreover, positive or negative shocks may lead employers and employees to … renegotiate low wages up and high wages down when agents' individual surpluses become negative. The model delivers rich business … cycle dynamics of wage distributions and explains why both low wages and high wages are more procyclical than wages in the …