Switzerland, traditionally a ‘zero unemployment’ economy, has seen an unprecedented rise in joblessness in the 1990s although unemployment fell again to a rather low level after 1997. This Paper tests whether Switzerland experienced a negative relative net demand shock against the low...

We develop an urban-search model in which firms post wages. When all workers are identical, the Diamond paradox holds, i.e. there is a unique wage in equilibrium even in the presence of search and spatial frictions. This wage is affected by spatial and labour costs. When workers differ according...

We consider a frictional labor market in which firms want to insure their senior employees against income fluctuations and, at the same time, want to recruit new employees to fill their vacant positions. Firms can commit to a wage schedule, i.e. a schedule that specifies the wage paid by the...

We survey the microfoundations, empirical evidence and estimation issues underlying the aggregate matching function. Several microeconomic matching mechanisms have been suggested in the literature with some successes but none is generally accepted as superior to all others. Instead, an aggregate...

This paper examines the regional distribution of public employment in Italy. It documents two facts. The first is that public employment is used as a subsidy from the North to the less wealthy South. About half of the wage bill in the South of Italy can be identified as a subsidy. Both the size...

I estimate a life cycle model of consumption choice with unemployment risk. Employed individuals face the risk of losing their job. Unemployed agents receive job random offers of different quality, which they can accept or reject. Following the loss of a job and during unemployment, an agent’s...

Still, globalisation and its effects on wages and employment is a major topic in the public press. Therefore, this article provides an overview of popular models studying the effects of an intensified international trade on the domestic labour markets in presence of imperfections on the latter....

This paper tests hysteresis effects in unemployment using panel data for 19 OECD countries covering the period 1956-2001. The tests exploit the cross-section variations of the series, and additionally, allow for a different number of endogenous breakpoints in the unemployment series. The...

A number of authors have recently emphasized that the conventional model of unemployment dynamics due to Mortensen and Pissarides has difficulty accounting for the relatively volatile behavior of labor market activity over the business cycle. We address this issue by modifying the MP framework...