This paper surveys the use of search and matching models in macroeconomics. It outlines the standard model, discusses its extensions, presents alternative formulations, considers the empirical evidence, and studies applications to macroeconomic questions such as business cycles, growth, and...

We incorporate reference-dependent preferences into a search-and-matching model of the labor market, in which firms have all the bargaining power and productivity follows an AR(1) process. Motivated by Akerlof (1982) and Bewley (1999), we assume that existing workers are willing to exert unobserved,

Payroll taxes represent a major distortionary influence of governments on labor markets. This paper examines the role of payroll taxation and the social safety net for cyclical fluctuations in a nonmonetary economy with labor market frictions and unemployment insurance, when the latter is only...

We consider a frictional labor market in which firms want to insure their senior employees against income fluctuations and, at the same time, want to recruit new employees to fill their vacant positions. Firms can commit to a wage schedule, i.e. a schedule that specifies the wage paid by the...

Recent research in macroeconomics emphasizes the role of wage rigidity in accounting for the volatility of unemployment fluctuations. We use worker-level data from the CPS to measure the sensitivity of wages of newly hired workers to changes in aggregate labor market conditions. The wage of new...

We study active labor market policies (ALMP) in a matching model. ALMPs are modelled as a subsidy to job search. Workers differ in their productivity, and search takes place along an extensive margin. An additional job seeker affects the quality of unemployed workers. As a result, the Hosios...

This paper introduces a labour force participation choice into a standard labour market matching model embedded in a dynamic stochastic general equilibrium set-up. The participation choice is modelled as a trade-off between forgoing the expected benefits of being search active and engaging in...

This paper introduces deep habits into a sticky-price sticky-wage economy and asks whether the countercyclical markup movements induced by deep habits is helpful for accounting for the dynamic effects of monetary policy shocks. We find that this is the case: When allowing for deep habits, the...

The picture of U.S. labour market dynamics is opaque. Empirical studies have yielded contradictory findings and debates have emerged regarding their implications. This paper aims at clarifying the picture, which is important for the understanding of the operation of the labour market, for the...

Do firms reduce employment when their insiders (established, incumbent employees) claim higher wages? The conventional answer in the theoretical literature is that insider power has no influence on employment, provided that the newly hired employees (entrants) receive their reservation wages....