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A number of authors have recently emphasized that the conventional model of unemployment dynamics due to Mortensen and Pissarides has difficulty accounting for the relatively volatile behavior of labor market activity over the business cycle. We address this issue by modifying the MP framework to allow for staggered multiperiod wage contracting. What emerges is a tractable relation for wage dynamics that is a natural generalization of the period-by-period Nash bargaining outcome in the conventional formulation. An interesting side-product is the emergence of spillover effects of average wages on the bargaining process. We then show that a reasonable calibration of the model can account well for the cyclical behavior of wages and labor market activity observed in the data. The spillover effects turn out to be important in this respect.

The paper analyzes the organization of the R&D activity in an incomplete contract framework. It provides theoretical foundations: (a) to understand how the allocation of property rights on innovations may affect both the frequency and the magnitude of these innovations; (b) to rationalize commonly observed features in research employment contracts, such as shop rights, trailer clauses, and the "hired for " doctrine; (c) to discuss the robustness of the so-called Schumpeterian hypothe-ses to endogenizing the organization of R&D; and (d) to provide a rationale for cofinancing arrangements in research activities. I.

I study the cyclical behavior of an equilibrium search model with endogenous job creation and destruction and extract from it a wage equation that can be compared with the econometric evidence. Job creation in the model is influenced by wages in new matches. I summarize microeconometric evidence on wages in new matches and show that the key model elasticities are consistent with the evidence. Therefore sticky wages is not the answer to the unemployment volatility puzzle. I discuss some alternative mechanisms that can increase volatility, in particular extensions of the model and alternative driving mechanisms. Jobs in the search and matching model command monopoly rents that are shared between the firm and the worker by a wage contract. The most common wage contract found in the literature is derived from Nash, and yields a wage rate that is a linear combination of the productivity of the match and the worker’s returns from search and nonmarket activities. Pissarides (1985) and Mortensen and Pissarides (1994) have shown that because nonmarket returns are less cyclical than labor productivity, employment in the model exhibits more cyclicality than in a competitive market-clearing model. The question that I address in this paper is the role of wages in the cyclical volatil-ities implied by this model. Shimer (2005a), in an influential paper, has shown that

We argue that trade economists should begin to seriously consider environments in which unemployment is carefully modeled. We introduce such a model, derive several results, and compare them to results derived in full employment models. We argue that some traditional results are probably too narrow (the determinants of comparative advantage) and that some results do not generalize to models with unemployment (the link between trade and income distribution for employed factors). We also show that in some important cases results do generalize (there is an extended Stolper–Samuelson Theorem that links trade to the distribution of income for searching factors) and that our model allows us to address issues that traditional models cannot handle (the impact of trade on unemployment and the welfare

We did experiments in a three-round bargaining game where the (perfect) equilibrium offer was $1.25 and an equal split was $2.50. The average offer was $2.11. Patterns of information search (measured with a computerized information display) show limited lookahead rather than backward induction. Equilibrium theories which adjust for social utilities (reflecting inequality-aversion or reciprocity) cannot explain the results because they predict subjects will make equilibrium offers to

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We present a model of asset valuation in which short-selling is achieved by searching for security lenders and by bargaining over the terms of the lending fee. If lendable securities are difficult to locate, then the price of the security is initially elevated, and expected to decline over time. This price decline is to be anticipated, for example, after an initial public offering (IPO), among other cases, and is increasing in the degree of heterogeneity of beliefs of investors about the likely future value of the security. The prospect of lending fees may push the initial price of a security above even the most optimistic buyer’s valuation of the security’s future dividends. A higher price can thus be obtained with some shorting than if shorting is disallowed.