bottom-line of the paper is that product market reforms will help to reduce aggregate unemployment under many circumstances … even though sectoral unemployment may increase. We also highlight that the mobility of high-skilled workers and the … distribution of unemployment across sectors determine whether productivity improvements in one sector affect aggregate unemployment …

When unemployment prevails, relations with a particular firm are valuable for workers. As a consequence, a worker may … shirk and switch firms. Our results thus suggest that unemployment is not a necessary device to motivate workers. We also … market characterized by unemployment. Surprisingly though, this does not compromise market performance. -- Relational …