In this paper we document that "frictional wage inequality" (i.e. due to pure luck in the matching process in the labor market) is large and that both the standard McCall search model and the simplest Diamond-Mortensen-Pissarides matching model, reasonably calibrated, are strikingly unable to...

The issue of whether unemployment benefits should increase or decrease over the unemployment spell is analyzed in an analytically tractable model allowing moral hazard, adverse selection and hidden savings. Analytical results show that when the search productivity of unemployed is constant over...

Evidence suggests that unemployed individuals can sometimes affect their job prospects by undertaking a costly action like deciding to move or retrain. Realistically, such an opportunity only arises for some individuals and the identity of those may be unobservable ex-ante. The problem of...

The issue of whether unemployment benefits should increase or decrease over the unemployment spell is analyzed in an analytically tractable model allowing moral hazard, adverse selection and hidden savings. Analytical results show that when the search productivity of unemployed is constant over...

In this paper, we incorporate a positive theory of unemployment insurance into a dynamic overlapping generations model with search-matching frictions and on-the-job learning-by-doing. The model shows that societies populated by identical rational agents, but differing in the initial distribution...

Evidence suggests that unemployed individuals sometimes can affect their job prospects by undertaking a costly action like deciding to move or retrain. Realistically, such an opportunity arises only for some individuals and the identity of those is unobservable. Unemployment insurance should...

The issue of whether unemployment benefits should increase or decrease over the unemployment spell is analyzed in an analytically tractable model allowing moral hazard, adverse selection and hidden savings. Analytical results show that when the search productivity of unemployed is constant over...

Standard search and matching models of equilibrium unemployment, once properly calibrated, can generate only a small amount of frictional wage dispersion, i.e., wage differentials among ex-ante similar workers induced purely by search frictions. We derive this result for a specific measure of...

We construct a bilateral search model of the housing market in which agents differ in their flow rewards while searching. Buyers and sellers enter the market with high flow rewards, but move at a Poisson rate to a state with low flow rewards if they do not transact in the meantime. We...

This paper introduces risk averse workers into a search and matching model and considers the quantitative performance of the model over the business cycle. Wages are determined by long term contracts between workers and firms, with firms providing insurance to workers against variation in labor...