Essays on worker displacement, human capital accumulation and monetary theory

Part I of this dissertation examines causes and consequences of worker displacement. Recent work has documented the large persistent earnings losses experienced by displaced high-tenure workers. The first essay assesses the welfare cost associated with this earnings risk. In a general-equilibrium, overlapping-generations framework with risk-averse individuals and no access to insurance markets, this cost is found to be substantial, on the order of one percent of GNP. Generous, long-duration unemployment insurance is shown to increase this cost. Centrally-financed severance payments, by contrast, are capable of fully eliminating this cost by providing income insurance without the moral hazard effects associated with unemployment insurance. The second essay develops a labor market matching model in which the earnings and unemployment experiences of displaced workers arise endogenously. Using U.S. labor market data, general human capital depreciation during unemployment is found to play a dominant role in accounting for displaced workers\u27 experiences, in contrast to the conventional view in which these experiences stem mainly from the loss of firm-specific human capital. This finding is important for correctly evaluating and designing labor market policies, particularly those affecting the duration of unemployment. It also suggests that empirical studies omitting depreciation effects are likely to be misspecified. Finally, human capital depreciation generates a novel source of multiplicity of (steady-state) equilibria. Part II of this dissertation generalizes search-theoretic models of monetary exchange. It is standard in the monetary search literature to assume that agents holding money cannot produce and, when goods are divisible, to restrict attention to special cases of the bargaining solution. In this essay, both restrictions are removed. Allowing agents with money to produce improves tractability of the model and makes its interpretation more intuitive. It also implies that the monetary equilibrium, if it exists, is unique. This contrasts with standard models that typically feature multiple monetary equilibria. Analysis of general bargaining solutions shows that, if agents are sufficiently patient, there exists some value for the bargaining power parameter such that the monetary equilibrium is efficient. This finding is reminiscent of a similar result in the search-based labor literature but is novel in the monetary literature