In a frictional labor market, when an employee receives an outside offer, his employer is naturally tempted to compete to retain him. Casual observation in the labor market, however, suggests that this type of ex post competition is rare. As a consequence, employers often let valuable employees...

Job search models of the labor market hypothesize a very tight correspondence between the determinants of labor turnover and individual wage dynamics on one hand, and the determinants of wage dispersion on the other. This paper offers a systematic examination of whether this correspondence is...

To study the political economy of immigration, we develop a common agency model where a trade union and a lobby of entrepreneurs offer contributions to the government to influence its decision on how many immigrants can enter the domestic economy. In the political equilibrium, anticipating that...

Many countries run substantial inflations. They do this despite the overwhelming theoretical arguments (and empirical evidence?) showing that price stability (or even mild deflation) is "better." This paper provides a simple model in which a government sometimes uses the inflation tax because it...

This paper uses a seminonparametric model and Consumer Expenditure Survey data to estimate life cycle profiles of consumption, controlling for demographics, cohort and time effects. In addition to documenting profiles for total and nondurable consumption, we devote special attention to the age...

Tobin's Q exceeds one, even without any adjustment costs, for a firm that earns rents as a result of monopoly power or of decreasing returns to scale in production. Even when there are no adjustment costs and marginal Q is always equal to one, Tobin's Q is informative about the firm's growth...

Economies respond differently to aggregate shocks that reduce output. While some countries rapidly recover their pre-crisis trend, others stagnate. Recent studies provide empirical support for a connection between aggregate growth and plant dynamics through their effect on productivity: the...

We construct a bilateral search model of the housing market in which agents differ in their flow rewards while searching. Buyers and sellers enter the market with high flow rewards, but move at a Poisson rate to a state with low flow rewards if they do not transact in the meantime. We...

The paper sets out a monetary business cycle model extended to include the production of credit that serves as an alternative to money in transactions and is subject to productivity shocks. The model provides some improvement on certain puzzles, in particular by capturing the procyclic movements...

There is a large literature, including work by Hall (1997), Chari, Kehoe, and McGrattan (2002), Gali, Gertler, and Lopez-Salido (2002), and many others that has studied the gap between the household's static marginal rate of substitution condition (MRS) between consumption and leisure and the...