Cross-country differences in labor market participation are often larger than differences in unemployment rates. The same holds true across demographic groups within a given economy. We argue that the interaction between labor force participation decisions and labor market frictions can help us...

This paper explores the relationship between volatility and welfare. Even though households prefer smooth streams of consumption and leisure, welfare can be increasing in the volatility of an exogenous driving force if factor supply is sufficiently elastic. We provide some analytical results for...

Shimer (2005) demonstrated that aggregate productivity shocks in a standard matching model cause fluctuations in key labor market statistics---such as the job-finding rate, the vacancy/unemployment ratio, and the unemployment rate---that are too small by an order of magnitude. This paper shows...

Standard models of employment fluctuations cannot reconcile the unemployment rate's remarkable persistence with the high job-finding rates found in worker flows data. A matching model emphasizing high hazard rates among newly formed firm-worker matches can resolve this shortcoming. In the model,...

Standard models of employment fluctuations cannot reconcile the unemployment rate's remarkable persistence with the high job-finding rates found in worker flows data. A matching model emphasizing high hazard rates among newly formed firm-worker matches can resolve this shortcoming. In the model,...

We estimate a dynamic general equilibrium model of the U.S. economy that includes an explicit household production sector and stochastic fiscal variables. We use our estimates to investigate two issues. First, we analyze how well the model accounts for aggregate fluctuations. We find that...