The most overworked figure in our society may be the unemployment rate. Newscasters, politicians, and economists use it in discussing everything from the overall health of the economy to the merits of alternative welfare programs. Despite its widespread use, however, the unemployment rate...

Unemployment occurs because workers and firms have control over wages and prices. The exercise of market power over wages interacts with its exercise over prices. Understanding this interaction sheds new light on the effects of policy interventions on unemployment and growth. Reforms that result...

I study the effects of product and labor market frictions in a dynamic general equilibrium model with a three-states representation of the labor market. Firms bargain with unions over wages and employment levels. This generates unemployment. Households take the associated unemployment risk as...