The New Keynesian Phillips curve explains inflation dynamics as being driven by current and expected future real marginal costs. In competitive labor markets, the labor share can serve as a proxy for the latter. In this paper, we study the role of real marginal cost components implied by search...

We develop a business cycle model with search and matching frictions in the labor market and show that on-the-job search generates substantial amplification and propagation. Rising search by employed workers in an expansion amplifies the incentives of firms to post vacancies. By keeping job...

We quantitatively assess the role of on-the-job search for labor market dynamics in a fully specified, real DSGE model with endogenous job creation and destruction. The model features heterogeneity of the productivity of firms, across which workers search, as well as heterogeneity of jobs within...

We demonstrate the possibility of indeterminacy and nonexistence of equilibrium dynamics in a standard business cycle model with search and matching frictions in the labor market. Our results arise for empirically plausible parameterizations and do not rely on a mechanism such as increasing returns.

We analyze the implications of intra-firm bargaining for business cycle dynamics in models with large firms and search frictions. Intra-firm bargaining implies a feedback from the marginal revenue product to wage setting, which leads firms to over-hire in order to reduce workers' bargaining...

Recent research shows that observed labor market flows can be explained in search and matching models only by assuming either implausibly large productivity shocks (Hall 2003) or an excessively high degree of real wage rigidity even for new hires (Shimer 2003). If this is not the case, the...