This project centers on theoretical and empirical models of the labor markets. It builds on the large collection of research on search models of the labor market. Recent work in equilibrium search models has shown that monopsony arises naturally in search models, with the degree of monopsony power depending upon the matching technology. A simple model in which wage dispersion arises in equilibrium even with homogeneous workers and firms will be considered. With this model, the statistical issues arising in estimation will be explored, using techniques recently introduced in the partial equilibrium search framework. Extensions to make the model more realistic will be examined, and data from the Survey of Income Program Participation and other sources will be fitted to the model. Three specific applications will be studied: 1) the measurement of local monopsony power; 2) aggregate labor market dynamics; and 3) the public finance implications of Unemployment Insurance changes on equilibrium labor market behavior. This approach to the study of labor markets is particularly important because it provides a way of asking whether "thin" labor markets have an effect on wages, and, ultimately, upon economic development in non-urban areas. For example, planners in rural areas commonly argue that it is difficult to attract a skilled labor force. This research provides the tools with which one can answer this question.
