Recent research documents mounting evidence for sizable and persistent biases in individual labor market expectations. This paper incorporates subjective expectations into a general equilibrium labor market model and analytically studies the implications of biased expectations for wage...

We model monopsony on the labor market using a separable matching model a la Choo and Siow (2006). We propose a simple method that estimates 1) the multidimensional determinants of productivity and non-wage preferences separately and 2) the variance of unobserved heterogeneity on both sides of...