This paper studies firms' job creation decisions in a labor market with search frictions. A simple labor market search model is developed in which a firm can search for a second employee while producing with a first worker, and this creates the equilibrium size distribution of firms. A firm...

This paper develops a dynamic model of the labor market in which the degree of substitution between employment and hours of work is determined as part of a search equilibrium. Each firm chooses its demand for working hours and number of vacancies, and the earnings profile is determined by Nash...