We construct a model that explicitly considers nonparticipation as well as employment and unemployment in order to (i) generate gross worker flows as observed in the U.S. data, and (ii) re-examine the effects of labor market policies frequently evaluated in two state models. The distinction...

We assess the consequences of increases in the scale of tax and transfer programs in the context of a model with idiosyncratic productivity shocks and incomplete markets. We contrast the outcomes for both hours worked and welfare relative to the results obtained in a stand-in household model,...