An examination of data on output and labor input reveals that some U.S. industries have marginal cost well below price. The conclusion rests on the finding that cyclical variations in labor input are small compared with variations in output. In booms, firms produce substantially more output and sell it for a price that exceeds the costs of the added inputs. The paper documents the disparity between price and marginal cost, where marginal cost is estimated from annual variations in cost. It considers a variety of explanations of the findings that are consistent with competition, but none is found to be completely plausible.

One of the important determinants of the response of saving and consumption to the real interest rate is the elasticity of intertemporal substitution. That elasticity can be measured by the response of the rate of change of consumption to changes in the expected real interest rated. A detailed study of data for the twentieth-century United States shows no strong evidence that the elasticity of intertemporal substitution is positive. Earlier findings of substantially positive elasticities are reversed when appropriate estimation methods are used.

Fluctuations in the equilibrium rate of unemployment can only be understood within a of the natural or equilibrium rate. It is not enough to say that unemployment is the difference between supply and demand in the labor market, though of course it always will be. In equilibrium, no participants in the market can have an unexploited opportunity to make themselves better off. At the equilibrium unemployment rate, employers cannot obtain labor at lower cost by offering work at below the market wage to the unemployed. Unemployed workers cannot raise their effective real incomes by taking lower wages in exchange for immediate employment. The task of the is to explain why any unemployment remains at all when these conditions are satisfied. Part of this problem has been studied in detail in the search theory of unemployment -- once a worker becomes unemployed, it is reasonably well understood why the worker does not become employed again immediately. The of why people become unemployed in the first place is less well developed and is the main concern of this paper. Most of the unemployed are looking for new work because their previous jobs ran out. Consequently, the main ingredient of a of the flow of workers into unemployment is a of the duration of employment. Such a is developed here, along reasonably standard lines.

An examination of data on output and labor input reveals that some U.S. industries have marginal cost well below price. The conclusion rests on the finding that cyclical variations in labor input are small compared with variations in output. In booms, firms produce substantially more output and sell it for a price that exceeds the costs of the added inputs. This paper documents the disparity between price and marginal cost, where marginal cost is estimated from annual variations in cost. It considers a variety of explanations of the findings that are consistent with competition, but none is found to be completely plausible.

One of the important determinants of the response of saving and consumption to the real interest rate is the ela sticity of intertemporal substitution. That elasticity can be measure d by the response of the rate of change of consumption to changes in the expected real interest rate. A detailed study of data for the twe ntieth-century United States shows no strong evidence that the elasti city of intertemporal substitution is positive. Earlier findings of s ubstantially positive elasticities are reversed when appropriate esti mation methods are used.