This paper extends a general equilibrium model of unemployment and working hours and evaluates the model on a 5 percent … relationship between standard hours, actual hours and hourly wages. The main results are: i) Actual hours only decreased by 40 … percent of the reduction in standard hours. ii) Hourly wages for shift workers rose relative to wages for daytime workers. iii …

higher wages. This increases firms' incentives to post more vacancies, which makes unemployment volatile and sensitive to … aggregate shocks. The model is robust to two major criticisms of existing theories of sluggish wages and volatile unemployment …I propose a new mechanism for sluggish wages based on workers' noisy information about the state of the economy. Wages …