Firms select not only how many, but also which workers to hire. Yet, in standard searchmodels of the labor market, all workers have the same probability of being hired. We arguethat selective hiring crucially affects welfare analysis. Our model is isomorphic to a searchmodel under random hiring...

The Swedish labour market and social policy is aimed at facilitating flexibility in the labourmarket. The active labour market policy and the design of the social security pension systemare two frequently mentioned examples of that policy...