This paper studies the cyclical dynamics of Mortensen and Pissarides' (1994) model of job creation and destruction when workers' effort is not perfectly observable, as in Shapiro and Stiglitz (1984). An occasionally-binding no-shirking constraint truncates the real wage distribution from below,...

Our new paper takes the same model to European data. First, we apply the methodology of Shimer ("Reassessing the Ins and Outs of Unemployment", mimeo, 2005) to calculate time series for hiring and separation probabilities in a set of European countries that have data on short-term and long-term...

Several recent papers (Shimer 2003a, 2003b; Costain and Reiter 2003; Hall 2003) have shown that general equilibrium labor market models have a hard time generating the degree of cyclical volatility in unemployment and vacancies that is observed in the data. These papers have suggested that rigid wages...

This paper considers a dynamic matching model with imperfectly observable worker effort. In equilibrium, the wage distribution is truncated from below by a no-shirking condition. This downward wage rigidity induces the same type of inefficient churning and "contractual fragility" as in Ramey and...

We study the cyclical dynamics of job creation and destruction when workers' effort is not perfectly observable. The no-shirking constraint may amplify fluctuations in hiring by making firms' surplus share procyclical, and may cause a burst of inefficient firing when a downturn begins. But...

Fluctuations of representative agent economies are not very costly. So if business cycles matter, it must be because agents face uninsured idiosyncratic risk which is somehow worsened by aggregate fluctuation. Idiosyncratic risk could be counteracted either through aggregate stabilization or...

This article examines the effects of transitory skill mismatch in a matching model with heterogeneous jobs and workers. In our model, some highly-educated workers may accept unskilled jobs for which they are over-qualified but are allowed to engage in on-the-job search in pursuit of a better...

La reforma laboral de 2012 acaba de cumplir tres años en febrero. Desde muchos ámbitos se han hecho afirmaciones sobre los efectos de la misma. Según las apreciaciones más optimistas, la reforma explica por qué el mercado laboral español fue capaz de crear más de 400.000 empleos en 2014...

We use a unique dataset to estimate the impact of a large credit supply shock on employment in Spain. We exploit marked differences in banks' health at the onset of the Great Recession. Several weak banks were rescued by the State and they reduced credit more than other banks. We compare...

This paper analyzes the role that global value chains (GVC) have played during the sovereign debt crisis in Europe, and the key policy challenges that Spain faces. First, we provide a comparative analysis of the export performance and FDI activities of Spanish firms, using the firm-level...