The net benefit from employment and duration dependence in the exit rate from unemployment

In reality, many other markets are characterized by a small amount of search frictions, yet time variation in gross flows and real economic activity are less pronounced than in the labor and housing markets. This paper asks "why?" Preliminary evidence suggests that heterogeneity amongst workers and houses is key. It is important both for understanding why search frictions exist and for understanding why wage and price adjustment is sluggish. Markets for more homogeneous products are therefore expected to respond more efficiently to shocks.