This paper explores some aspects of the exchange process that should be of interest to economists who use search theory, and especially to those who use search as a foundation for monetary economics. We are mainly concerned with a question that seems basic but has not been analyzed previously: is there some way to determine endogenously which agents are willing to invest resources in the process of active search for trading partners, and which agents prefer to wait passively for trading partners to come to them? In particular, given a group of buyers with money and a group of sellers with goods, is there any reason to expect that buyers will search for sellers, rather than the other way around? One obvious factor is the relative cost of transporting goods and money; but we are interested in examining whether there is anything about the process of monetary exchange per se, and not merely exogenous search costs, that makes buyers more willing than sellers to bear the costs of seeking out trading partners. We investigate this within a generalized version of the search-theoretic model of fiat money in Kiyotaki and Wright (1991, 1993). We find that there may exist equilibria in which buyers search while sellers do not, even if the search cost is greater for the former. However, there can also exist other equilibria with different properties. Perhaps the key finding is that the situation is not symmetric: factors that determine whether to search are fundamentally different for buyers and sellers. One property of an equilibrium in which only buyers search is that money appears on one side of every transaction, because if sellers do not search they do not meet and cannot barter. This is consistent Robert W. Clower's (1967) observation that money buys goods and goods buy money, but goods do not buy goods, although here it is derived endogenously rather than assumed. Some search-based monetary models simply rule out barter, including Peter A. Diamond (1984), Douglas M. Gale (1986), Diamond and Joel Yellin (1990), Alessandra Casella and Johnathon S. Feinstein (1990), Kiminori Matsuyama et al. (1993), Victor E. Li (1995), and Alberto Trejos and Wright (1995). It is difficult to motivate this absence of barter in these papers. In a model that is similar to the one used here, except search is costless, S. Rao Aiyagari and Neil Wallace (1992) prove that all equilibria involve some barter. A contribution of this paper is to show that barter may disappear once the decision to search is endogenized.

Empirical studies of job search strongly suggest that the reservation wages of unemployed job seeking individuals decline with the length of their respective unemployment spells. Previous explanations of this behaviour based on age-effects, liquidity constraints, and limited unemployment benefits are not adequate. We provide a new answer to this question, based on the reasonable assumption that workers do not have precise knowledge of the distribution of the prevailing wages. An individual model of job search and learning is formulated. It is shown that the declining trend of reservation wages naturally arises due to the selection process, when search costs are not too small. The example of a normal wage offer distribution is analysed and the implications are discussed.

We attempt to further characterize the search strategies of the employer. In the article, we discuss how characteristics of the employer or conditions that the employer faces affect the optimal search strategies and the probability of filling a vacancy in each period. Semiparametric and parametric methods are used to estimate hazard rates of filling vacancies. The results suggest that for the given sample of vacancies, the general form of the hazard function is nonmonotonic. Additionally, the results suggest that those employers who have advance notice of the vacancy may search longer than those employers who do not.

This study analyzes the manner in which certain favorable shifts in labor demand affect job search. Although all shifts increase reservation wages, they do not necessarily decrease expected unemployment spell durations and increase expected post-unemployment wages, so that upward-sloping short-run Phillips curves may occur. A result due to Chamberlain is used to demonstrate that if the wage offer distribution is restricted to be logconcave, two of the shifts guarantee downward-sloping Phillips curves. For one of these two shifts, previous research by Flinn and Heckman used logconcavity in a different manner to achieve properly shaped Phillips curves.

We analyze two unemployment insurance systems. In one, unemployed workers receive benefits while those on reduced hours do not, as in North America (at least until recently). In the other, short-time compensation is paid to workers on reduced hours, as in Europe. The first system causes inefficient temporary layoffs for some parameters; the latter does not, but implies inefficient hours per worker. Some evidence is presented regarding these effects. Despite policymakers' recent enthusiasm for short-time compensation, the clear implication of this project is that changes should come on the tax, not benefit, side of the system.

We analyze equilibrium in a labor market model wherein it takes time for the workers to contact firms. Workers, assumed identical, repeatedly sell their labor services all through their work lives, choosing their search intensity endogenously. Identical firms attempt to maximize their steady-state profit flow. We focus on the importance and consequences of balanced matching, in which workers are more likely to contact a larger firm. A unique equilibrium is shown to exist wherein all firms offer the same wage and select an employment level at which wage equals marginal product. The effect of traditional labor market policies and empirical implications are discussed.

We analyze equilibrium in a labor market model wherein it takes time for the workers to contact firms. Workers, assumed identical, repeatedly sell their labor services all through their work lives, choosing their search intensity endogenously. Identical firms attempt to maximize their steady-state profit flow. We focus on the importance and consequences of balanced matching, in which workers are more likely to contact a larger firm. A unique equilibrium is shown to exist wherein all firms offer the same wage and select an employment level at which wage equals marginal product. The effect of traditional labor market policies and empirical implications are discussed.

The paper has two purposes: (1) to extend the theory of job search to include the case in which job prospects are characterized by layoff risk as well as the wage and (2) to synthesize the search and implicit-contract approaches by using the former to model the supply side and the latter to model the demand side of a labor market. The result is a simple and consistent theory of labor market equilibrium under conditions of imperfect information and uncertain derived demand. The theory purports to explain both search and layoff unemployment as market equilibrium phenomena.