Recessions are times of increased uncertainty and volatility at the micro level. This widely documented empirical pattern has been interpreted as the effect of uncertainty shocks, mediated by various frictions, on aggregate economic activity. We explore the hypothesis that the causation runs the...

We study the design of optimal incentives in a two-player dynamic contest. Two players continuously spend costly effort to attain a score lead, which is also affected by noise. The first player to reach a predetermined score difference (finish line) wins a prize. We focus on the choice of the...

Using data from the Survey of Income and Program Participation (SIPP) covering 1990-2011, we document that a surprisingly large number of workers return to their previous employer after a jobless spell and experience more favorable labor market outcomes than job switchers. Over 40% of all...

In a frictional labor market, when an employee receives an outside offer, his employer is naturally tempted to compete to retain him. Casual observation in the labor market, however, suggests that this type of ex post competition is rare. As a consequence, employers often let valuable employees...