We develop a utility based model of fluctuations, with nominal rigidities, and unemployment. In doing so, we combine …-Mortensen-Pissarides model, with its focus on labor market frictions and unemployment. In developing this model, we proceed in two steps. We … effect on unemployment in the constrained e?cient allocation. We then focus on the implications of alternative real wage …

theoretical and empirical literature on the design of labor market policies and institutions in advanced economies. We organize … invest in existing relations, is not that simple, and the design of labor market institutions faces delicate trade-offs. …