We build a RBC endogenous separation matching model and introduce efficiency wages along the lines of Akerlof (1982). While the standard endogenous separation matching model reveals shortcomings in explaining correlations and volatilities jointly, this approach performs reasonably well along...

Times of high unemployment always inspire debates on the role of labor market policy and its optimal implementation. This paper uses a dynamic model of search unemployment and bilateral wage bargaining, rich enough to analyze a set of policy instruments with respect to their employment and...

In this article, we use a stylized model of the labor market to investigate the effects of three alternative and well-known bargaining solutions. We apply the Nash, the Egalitarian and the Kalai-Smorodinsky bargaining solutions in the small firm's matching model of unemployment. To the best of...

We investigate the behavior of the unemployment rate after a government expenditure shock and present evidence that the group of asset-holding households reacts very different from the group of liquidity-constrained consumers. Our findings suggest that the unemployment rate is likely to decrease...