A labor market model with costly search and recruiting is constructed. It incorporates many features found in other models and provides new insights into the effects of externalities and transaction costs. The model possesses a continuum of equilibria, some of which may be Pareto-ranked, with...

When unemployed workers are available, why don't firms cut wages until the excess supply is eliminated? In his book, Why Wages Don't Fall During a Recession, Truman F. Bewley concludes, based on interviews with managers and labor leaders, that the most important factor inhibiting wage cuts is...

How does firm entry affect innovation incentives and productivity growth in incumbent firms? Micro-data suggests that there is heterogeneity across industries - incumbents in technologically advanced industries react positively to entry, but not in laggard industries. To explain this pattern, we...

We study a Lucas (1978) "fruit-tree" economy under the assumption that agents are Choquet expected utility (CEU) rather than standard expected utility (EU) decision makers. The agents’ non-additive beliefs about the economy’s stochastic dividend payment process may thus express...

This paper analyzes the intertemporal allocation effects of anticipated tax rate changes, reconsidering the recommendations of the Meade Committee in a perfect foresight general equilibrium model of economic growth. It is shown that the R-base (or consumption) tax can be more distortionary than...