Recent research seeking to explain the strong cyclicality of US unemployment emphasizes the role of wage rigidity. This paper proposes a micro-founded model of
We study a labor market equilibrium model in which firms sign optimal long-term contracts with workers. Firms that are financially constrained offer an increasi
This paper analyzes the effects of fixed-term contracts using a version of the Lucas and Prescott island model with undirected search. A fixed-term contract of