We consider a matching model of employment with wages that are flexible for new hires, but sticky within matches. We depart from standard treatments of sticky wages by allowing worker effort to respond to the wage being too high or low, rendering the effective wage (wage divided by output) more...

The standard theory of household portfolio choice is hard to reconcile with the following facts. (i) Despite a high rate of returns the average household holds a low share of risky assets (equity premium puzzle). (ii) The share of risky assets increases in age. (iii) The share of risky assets is...