Shimer puzzle

This course presents a matching model of unemployment. It uses the model to study unemployment fluctuations; job rationing; efficient unemployment and unemployment gap; and labor market policies such as minimum wage, public employment, and unemployment insurance.

This paper proposes a matching model of the labor market with job rationing: unemployment does not disappear in the absence of matching frictions. In recessions, job rationing drives the rise of unemployment, whereas matching frictions contribute little to it.