who suffer involuntary layoffs. Matching and search-island models have labour market frictions and incomplete markets. The …

relatively choosier at the beginning of their unemployment spell. Hence they tend to continue to search unless a sufficiently …

This paper examines competitive search equilibrium when workers' effort choice and 'type' are private information. We …

or more of the posted wages, i.e. search, before deciding where to apply. Both with homogeneous and heterogeneous forms …, equilibrium wage dispersion is necessary for the economy to approximate efficiency. Without wage dispersion, workers do not search …, and wages are depressed. As a result: (a) there is excessive entry of firms; and (b) because, in the absence of search …

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 … (reservation) wage paid. We show that in a large class of search and matching models this statistic (the 'mean-min ratio') can be …