What explains huge wage gaps between different hukou and gender groups in China? This paper uses an overlapping generation model with human capital investment and occupational choices to quantify how much wage gaps between these groups can be imputed to two types of talent allocation frictions,...

Using directed search to model the product market and the labor market, I show that large plants can pay higher wages to homogeneous workers and earn higher expected profit per worker than small plants, although plants are identical except size. A large plant charges a higher price for its...

Using data from the Census, ACS and the CPS, we document that a large part of long-run reallocation of labor from the goods to the service sector took place within narrowly defined groups of workers. In particular, sectoral reallocation reflects a labor market trend that is distinct from the...

We study a directed search equilibrium with risk-averse workers who can search on the job and accumulate non-contingent assets under a borrowing limit. Search outcomes affect earnings and wealth accumulation. In turn, wealth and earnings affect search decisions by changing the optimal trade-off...