In this article I briefly review recent developments in search theory. Particular attention is given to the framework of directed search. I first illustrate the inefficiency that arises in the equilibrium of standard (undirected) search models. Then I provide a formulation of directed search and...

A worker's job can be improved through on-the-job search (OJS) and job upgrading. Incorporating these external and internal job dynamics into a directed search model, this paper analytically characterizes the socially efficient allocation and quantitatively evaluates the model. The analysis...

Capital reallocation is procyclical and dispersion in Tobin's q across firms is counter-cyclical or acyclical. These facts run counter to the Schumpeterian view of capital reallocation embodied in modern theories of business cycles. To resolve the puzzles, we model an economy with search...

Using data from the Census, ACS and the CPS, we document that a large part of long-run reallocation of labor from the goods to the service sector took place within narrowly defined groups of workers. In particular, sectoral reallocation reflects a labor market trend that is distinct from the...

When there are search frictions in the labor market, physical capital accumulation by firms interacts with job dynamics. To study this interaction, this paper integrates directed, on-the-job search (OJS) into the neoclassical theory of firm investments, analytically characterizes the social...

When a society wants to control aggregate emission under a certain target, is it more desirable to impose a tax or a nontradable regulatory standard on emission? We answer this question by focusing on the role of productivity heterogeneity across a continuum of plants. The plants are...

By integrating frictional sorting into the neoclassical framework with post-match investment by firms, this paper analyzes the social optimum and the equilibrium. A main theoretical result is that post-match investment restores positive assortative matching (PAM) to the social optimum in the...

Bank loans are more available and cheaper for new and small businesses in the U.S. in areas with highly concentrated banks than in areas with highly competitive banks. To explain this fact, we analyze banks' decisions to screen the project and their subsequent competition in loan provisions. It...