Gomes, Joao FGreenwood, JeremyRebelo, Sergio2023-05-222023-05-222001-01-012016-06-01https://repository.upenn.edu/handle/20.500.14332/34461A search-theoretic model of equilibrium unemployment is constructed and shown to be consistent with the key regularities of the labor market and business cycle. The two distinguishing features of the model are: (i) the decision to accept or reject jobs is modeled explicitly, and (ii) markets are incomplete. The model is well suited to address a number of interesting policy questions. Two such applications are provided: the impact of unemployment insurance, and the welfare costs of business cycles.© 2001. This manuscript version is made available under the CC-BY-NC-ND 4.0 license (http://creativecommons.org/licenses/by-nc-nd/4.0/).FinanceFinance and Financial ManagementArticle