When workers' search efforts are unobservable, the provision of insurance against firm-specific shocks adversely affects their incentives to find better jobs. In consequence, the equilibrium contract prescribes low wages and underemployment to encourage workers to leave low-productivity firms; and it employs both quits and layoffs to induce separations, with the mix depending both on the relative efficiency of on- and off-the-job search and on the search-incentive effects of layoffs.

This paper deals with the cost-benefit valuation of urban land in residential and road use, when there is flow congestion in transportation and congestion tolls are not imposed. Conventional procedures for determining the shadow value of land in road or residential use ignore certain general equilibrium effects, and always overstate the true values. To illustrate the correct procedures, an urban simulation model is used to calculate shadow rents of land as a function of location. The model is more realistic than most theoretical urban models, particularly in its treatment of congestion.