SEARCH IN MACROECONOMIC MODELS OF THE LABOR MARKET

This chapter assesses how models with search frictions have shaped our understanding of aggregatelabor market outcomes in two contexts: business cycle fluctuations and long-run (trend) changes. Wefirst consolidate data on aggregate labor market outcomes for a large set of OECD countries. We thenask how models with search improve our understanding of these data. Our results are mixed. Searchmodels are useful for interpreting the behavior of some additional data series, but search frictions perse do not seem to improve our understanding of movements in total hours at either business cycle frequenciesor in the long-run. Still, models with search seem promising as a framework for understanding howdifferent wage setting processes affect aggregate labor market outcomes....