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macromodel. While temporary shocks are consistent with the business cycle fact of little real wage and large employment … employment. Hence, the model solves the productivity puzzle and is capable of matching both business cycle and long-run facts … concerning movements of real wages and employment …
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In the United States, many laid-off workers are recalled to their former employer. I develop an asymmetric information model of layoffs in which high productivity workers are more likely to be recalled and may choose to remain unemployed rather than accept a low-wage job. In this case,...
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