A question on labour market.
Obtain an expression for the equilibrium (steady state) unemployment rate u* based on the law of motion for unemployment in a two-state model where the aggregate job finding rate is ft , the exogenous job breakdown rate is st , and workers subject to job loss have a chance of instantaneously finding a job at the usual job finding rate. Interpret the difference between this equilibrium unemployment rate and one arising in a model where individuals cannot obtain a new job in the same period if fired.