Empirical and theoretical implications of frictional labor markets.

Summary I use search models as a starting point for my analysis, examining the impact of frictions from either a theoretical or an empirical perspective. In Chapter 1 I analyze the effects of uncertainty on the macroeconomy. Empirical estimates show that uncertainty has a negative impact on the economy and that the labor market is an important transmission channel. A general equilibrium model with DMP frictions is able to reproduce the observed facts. In Chapter 2 I use a Time Varying Parameter SVAR with stochastic volatility to investigate the properties of job creation in the United States and their variation over time. The estimates indicate that the volatility depends largely on demand and price shocks. Jobs responded negatively to technology shocks until the early 1990s. Chapter 3 incorporates the spatial dimension into a search model. This allows to explain some regularities observed in Austrian data: i) the existence of a reservation frontier between wage and distance. ii) the change in job search strategy. iii) the discouraging effect of unemployment benefits. In Chapter 4 I present a model that explains the selection of new hires between short and long term contracts. Using an Italian database, we find that the probability of obtaining a permanent contract depends negatively on the degree of mismatch between the worker's education and the occupation. Moreover, reforms that liberalize fixed-term contracts encourage their use, but they have non-linear effects on the unemployment rate.