The paper develops an equilibrium search and matching model where two-person families as well as singles participate in the labor market. We show that equilibrium entails wage dispersion among equally productive risk-averse workers. Marital status as well as spousal labor market status matter...

The paper extends the basic Stiglitz (1982) model of optimal income taxation into general search equilibrium. When we extend the basic taxation model to include a more realistic treatment of the labor market, a number of new interesting mechanisms arise. When wages are fixed we find that a "work...

Recent analyses of wage bargaining has emphasized the distinction between insiders and outsiders, yet one typically assumes that insiders and recently hired outsiders are paid the same wage. We consider a model where the starting wage for outsiders may be lower than the insider wage, but...

The paper presents a tractable general equilibrium model of search unemployment that incorporates absence from work as a distinct labor force state. Absenteeism is driven by random shocks to the value of leisure that are private information to the workers. Firms offer wages, and possibly sick...

Conventional models of equilibrium unemployment typically imply that proportional taxes on labor earnings are neutral with respect to unemployment as long as the tax does not affect the replacement rate provided by unemployment insurance, i.e., unemployment benefits relative to after-tax...

How does central bank conservatism affect labor market reform? In this paper we examine the economic forces at work. An increase in conservatism triggers two opposite effects. It reduces the inflation bias of discretionary monetary policy and hence the benefits of a reform. It also increases...

While examining the macroeconomic effects of increased government control of the informal sector, this paper develops a two-sector general equilibrium model featuring matching frictions, and heterogeneous workers in terms of moral. This facilitates an analysis of how wage setting and...

The paper presents a model that allows a unified analysis of sickness absence and search unemployment. Sickness appears as random shocks to individual utility functions, interacts with individual search and labor supply decisions and triggers movements across labor force states. The employed...