We analyse a model of equilibrium directed search in a large labour market. Each worker, observing the wages posted at all vacancies, makes a fixed, finite number of applications, "a". We allow for the possibility of "ex post" competition should more than one vacancy want to hire the same worker. For each "a", there is a unique symmetric equilibrium in which all vacancies post the same wage. When "a"= 1, the common posted wage lies between the competitive and monopsony levels, and equilibrium is efficient. When "a" > 1, all vacancies post the monopsony wage. Some workers fail to find a job, some find a job at the monopsony wage, and some-those for whom there is competition-get the competitive wage. Equilibrium is inefficient when "a" > 1; in particular, there is excessive vacancy creation. Copyright 2006 The Review of Economic Studies Limited.

This paper presents a matching model with low-and high-skilled workers and simple and complex jobs. I show that the degree to which low-skilled workers are harmed by high-skilled workers who are willing to temporarily accept simple jobs depends on the relative productivity of high-and low-skilled workers on simple jobs and on the quit rate of high-skilled workers. Under certain conditions, low-skilled workers can benefit from job competition with highskilled workers. Within this framework, some explanations for the high and persistent unemployment rates of lower educated workers in the 1990s are evaluated.

Using a country-industry panel dataset (EUKLEMS) we uncover a robust empirical regularity, namely that high-risk innovative sectors are relatively smaller in countries with strict employment protection legislation (EPL). To understand the mechanism, we develop a two-sector matching model where …rms endogenously choose between a safe technology with known productivity and a risky technology with productivity subject to sizeable shocks. Strict EPL makes the risky technology relatively less attractive because it is more costly to shed workers upon receiving a low productivity draw. We calibrate the model using a variety of aggregate, industry and micro-level data sources.We then simulate the model to re ‡ect both the observed di¤erences across countries in EPL and the observed increase since the mid-1990s in the variance of …rm performance associated with the adoption of information and communication technology. The simulations produce a di¤erential response to the Acknowledgements: We would like to thank Wouter den Haan, Egbert Jongen, Roland Luttens, Marcel Jansen, participants of CAED, Tokyo and ECB/CEPR Labour Market Workshop, Frankfurt as well as seminar participants at the University of Copenhagen, CPB, the Tinbergen Institute, VU Universiy, University of Maastricht and Nederlandsche Bank for useful comments and suggestions. 1 arrival of risky technology between low-and high-EPL countries that coincides with the …ndings in the data. The described mechanism can explain a considerable portion of the slowdown in productivity in the EU relative to the US since 1995.