We develop a dynamic model that incorporates the insights of both the agency cost and asset specificity literature aboutcorporate finance. In general, we find that neither can be ignored, and that the optimal capital structure minimizes agency cost and asset specificity considerations. A key...

This paper examines why unemployed skilled workers are reluctant to accept interim unskilled jobs. We develop a bilateral search model in which workers face a job change cost and firms incur a hiring cost for each vacancy filled. The outcome of the bilateral search displays mismatching where...