We extend Armstrong’s result on exclusion in multi-dimensional screening models in two key ways, providing support for the view that this result holds true in a large class of models and is applicable to many different markets. First, we relax the strong technical assumptions he imposed on...

We develop an open economy general equilibrium model, with auction-based directed search unemployment, to study the interactions of trade and unemployment. The theory ascribes all outcomes purely to the fundamentals of technology and endowment. If countries differ by endowment, trade makes both...

This is an introduction and overview of the special issue on "Macroeconomics with frictions".

How much of residual wage dispersion can be explained by an absence of coordination among firms? To answer, we construct a dynamic directed search model with identical workers where firms can create high- or low-productivity jobs and are uncoordinated in their offers to workers, calibrated to...

We study the implementation of constrained-efficient allocations in labour markets where a basic coordination problem leads to an equilibrium matching function. We argue that these allocations can be achieved in equilibrium if wages are determined by ex post bidding. This holds true even in...

A dynamic model of intergovernmental competition for a large plant is presented, when local productivity is uncertain. One firm determines the location of its plant in each period by conducting an auction, soliciting bids from local governments. Equilibrium subsidies from the local governments...

We examine the implications of worker heterogeneity on the equilibrium matching process, using a directed search model. Worker abilities are selected from a general distribution, subject to some weak regularity requirements, and the firms direct their job offers to workers. For large markets we...