Search-Theoretic Models of the Labor Market: A Survey

The survey literature on search-theoretic models of the labor market. They show how this approach addresses many issues, including the following: Why do workers sometimes choose to remain unemployed? What determines the lengths of employment and unemployment spells? How can there simultaneously exist unemployed workers and unfilled vacancies? What determines aggregate unemployment and vacancies? How can homogeneous workers earn different wages? What are the trades offs firms face from different wages? How do wages and turnover interact? What determines efficient turnover? It discusses various modeling choices concerning wage determination and the meeting process, including recent models of directed search.