We study a search model with employment protection legislation. We show that if the output from the match is uncertain ex ante, there may exist a discriminatory equilibrium where workers with the same productive characteristics are subject to different hiring standards. If a bad match takes...

We study a search model with employment protection legislation. We show that if the output from the match is uncertain ex ante, there may exist a discriminatory equilibrium where workers with the same productive characteristics are subject to different hiring standards. If a bad match takes...

We analyze the consequences of an increase in the supply of highly educated workers on relative and real wages in a search model where wages are set by Nash-bargaining. The key insight is that an increase in the supply of highly educated workers improves the firms' outside option. As a...