On the Efficiency of Matching and Related Models of Search and Unemployment.

This paper describes a simple framework for evaluating the allocative performance of economies characterized by trading frictions and unemployment. This framework integrates the normative results of earlier Diamond-Mortensen-Pissarides bilateral matching-bargaining models of trade coordination and price-setting, and consists of a set of general conditions for constrained Pareto efficient resource allocation that are applicable to conventional natural rate models. To illustrate, several conventional models of the labor market are reformulated as matching-bargaining problems and analyzed using this framework. Copyright 1990 by The Review of Economic Studies Limited.

Factor Market Search and the Structure of Simple General Equilibrium Models.

This paper presents a simple general equilibrium model in which unemployed workers search for jobs and vacant firms search for employees. Formally, the author develops a two-sector, constrained efficient version of the Diamond-Mortensen-Pissarides matching model of trade coordination. This approach to modeling factor market search appears promising since its algebraic development parallels Ronald W. Jones's treatment of the two-sector model of production, and the latter framework underlies most applied general equilibrium analyses. Some illustrative short-run and steady-state results are presented concerning the behavior of open and closed economies that exhibit unemployment and vacancies. Copyright 1990 by University of Chicago Press.

Layoffs, Recruitment, and Interfirm Mobility.

Contract and search theories are integrated to provide a consistent explanation of contract formation, the intertemporal structure of labor markets, the absence of ex post clearing, and thus of unemployment in a contractual setting. Self-fulfilling equilibria are described in which low-productivity firms lay off some workers, while high-productivity firms' recruitment (search) intensity and the resulting degree of interfirm mobility are endogenous. The effects of severance pay on layoffs and mobility are identified. Finally, the market economy is shown to generate too few layoffs whenever high-productivity firms recruit new hires: without recruitment, laid-off workers are immobile and equilibrium is constrained efficient. Copyright 1986 by University of Chicago Press.

Unemployment and Vacancies with Sectoral Shifts.

Recent analyses of unemployment-vacancy series suggest that aggregate shocks, rather than sectoral shocks, are the primary factors responsible for unemployment fluctuations. This inference follows from two widely held beliefs: sectoral shocks induce only positive unemployment-vacancy comovements, while negative comovements are necessarily the result of aggregate demand shocks. This paper describes an equilibrium matching model that identifies plausible circumstances in which neither assumption is correct, thus suggesting that unemployment-vacancy data are inconclusive. Interestingly, this model's novel results are due to standard features in the contracting literature: firms experience relative price shocks and negotiate contracts that prescribe temporary layoffs. Copyright 1994 by American Economic Association.