We derive the shape of optimal unemployment insurance contracts when agents can exert search effort but have private information about their search technology. We derive a recursive solution of our adverse selection problem with repeated moral hazard. Conditions under which the UI agency should...

since the expected wage is increasing in the expected number of offers received since the job started. The business-cycle volatility of wages is higher for new hires and for job-to-job switchers than for job stayers since workers can sample from a larger pool of job offers in a boom than in a...

The Dynamic Effects of Aggregate Demand and Supply Disturbances in Models with Heterogeneous Inputs

This finding is important for several active lines of research in macro/labor. For example, in the literature on the quantitative analysis of labor search models, it is the behavior of wages that distinguishes different calibration strategies with radically different implications. Current...

We show that the key identifying assumptions underlying the existing approaches to identifying technology shocks in the data are violated in models with heterogeneous capital and labor. We propose a new method to identifying technology shocks in the data in presence of factor heterogeneity and...

In standard monetary models nominal interest rates should be decreased in response to a switch to a lower inflation target. This paper considers this interaction between inflation and nominal interest rates in a dynamic model of liquidity. In a repeated Diamond&Dybvig economy a financial...

We propose a way to measure the contribution of search frictions to the level of wage dispersion observed in the data. Using the data from the 1979 cohort of the National Longitudinal Survey of Youth we find that the variance of match qualities between workers and employers accounts for about 6%...

We exploit policy discontinuity at U.S. state borders to identify the effects of unemployment insurance policies on unemployment. We find large effects of unemployment benefit extensions on unemployment. In fact, the estimates imply that most of the persistent increase in unemployment during the...

Does the market allocate the right workers to the right jobs? Since observable (to economists) variables account for only a small fraction of the wage variance in the data, to answer this question it is essential to study assortative matching between employers and employees based on their...