I discuss the failure of the canonical search and matching model to match the cyclical volatility in the job finding rate. I show that job creation in the model is influenced by wages in new matches. I summarize microeconometric evidence and find that wages in new matches are volatile and...

We examine the implications of tax and subsidy policies for employment in the ?three worlds of welfare?, Anglo-Saxon, Continental European and Scandinavian. We argue that home production is key to a proper evaluation of the employment outcomes. Anglo-Saxon low-support policies encourage more...

We examine wages and employment for junior and senior workers when seniority is firm-specific. We show that if workers are risk averse, the firm chooses both the junior and senior wage independently of the wage offers received by its workers from other firms. Junior workers are paid less than...

Theoretical predictions of the impact of total factor productivity (TFP) growth on unemployment are ambiguous, and depend on the extent to which new technology is embodied in new jobs. We evaluate a model with embodied and disembodied technology, capitalization, and creative destruction effects....

This paper surveys the microfoundations, empirical evidence, and estimation issues underlying the aggregate matching function. There is no consensus yet on microfoundations but one is emerging on estimation. An aggregate, constant returns, Cobb-Douglas matching function with hires as a function...