This paper is motivated by the fact that nearly half of U.S. college students drop out without earning a bachelor’s degree. Its objective is to quantify how much uncertainty college entrants face about their graduation outcomes. To do so, we develop a quantitative model of college choice. The innovation is to model in detail how students progress towards a college degree. The model is calibrate...

The Ins and Outs of European Unemployment In this paper we study the contribution of inflows and outflows to the dynamics of unemployment in three European countries, the United Kingdom, France and Spain. We compare performance in these three countries making use of both administrative and labor force survey data. We find that the impact of the 1980s reforms in Britain is evident in the contrib...

We develop a dynamic equilibrium model of labor demand with adverse selection. Firms learn the quality of newly hired workers after a period of employment. Adverse selection makes it costly to hire new workers and to release productive workers. As a result, firms hoard labor and under-react to labor demand shocks. The adverse selection problem also creates a market for temporary workers. In equ...

Who Pays for It? The Heterogeneous Wage Effects of Employment Protection Legislation Theory predicts that the wage effects of government-mandated severance payments depend on workers’ and firms’ relative bargaining power. This paper estimates the effect of employment protection legislation (EPL) on workers’ individual wages in a quasi-experimental setting, exploiting a reform that introduced un...

This paper studies the impact of tax-financed universal health coverage schemes on macroeconomic aspects of labor supply, asset holding, inequality, and welfare, while taking into account features common to developing economies, such as informal employment and tax avoidance, by constructing a dynamic stochastic general equilibrium model with heterogeneous agents. Agents have different education...

Using two data sets derived from German administrative data, including a linked employer-employee data set, we investigate the cyclicality of worker and job flows. The analysis stresses the importance of two-sided labour market heterogeneity in this context, taking into account both observed and unobserved characteristics. We find that small firms hire mainly unemployed workers, and that they d...

Heterogeneity in Real Wage Cyclicality This paper presents evidence that real wage cyclicality can be a particularly heterogeneous parameter, depending on different worker characteristics and also on the specific stage of the business cycle. Using matched employer-employee panel data for Portugal covering the period 1986-2004, real wages are shown to be considerably more procyclical during rece...

Product Market Regulation, Firm Selection and Unemployment This paper analyzes the effect of Product Market Regulation (PMR) on unemployment in a search model with heterogeneous multiple-worker firms. In our setup, PMR modifies the distribution of firm productivities, thereby affecting the equilibrium rate of unemployment. We distinguish between PMR related to entry costs and PMR that generates...

This paper investigates to what extent a New Keynesian, monetary model with the addition of a microfounded, non-Walrasian labor market based on union bargaining is able to replicate key aspects of the business cycle. The presence of a representative union offers an explanation for two features of the cycle. First, it generates an endogenous mechanism which produces persistent responses of the e...