A matching model in the line of Mortensen and Pissarides (1994) is augmented with a lowskill labor market and firing costs. It is shown that even with flexible wages unemployment is higher among the low-skilled and increases with skill-biased technological change. The two main reasons are that...

The paper develops a two-sector general equilibrium search model where "goods" are produced exclusively in the market and "services" are produced both in the market and within the households. We use the model to examine how unemployment and welfare are affected by labor taxes in general and...

The paper develops a two-sector general equilibrium search model where goods are produced exclusively in the market and services are produced both in the market and within the households. We use the model to examine how unemployment and welfare are affected by labor taxes in general and sectoral...