We develop a model of search in OTC markets with asymmetric information and  trade occurring under double-sided uncertainty over asset quality, where holding the asset does not necessarily translate into knowing its quality. This leads to deterioration of market information conditions over subsequent trades, causing sellers to become more pessimistic even though aggregate asset quality remains unchanged. If re-trade opportunities are frequent, information in the economy becomes coarser, hindering market liquidity and volume of trade. Additionally, if good assets are not originated at a higher volume than what is currently being traded in the market, only the most pessimistic sellers will trade in equilibrium.

The allocation of workers across occupations is a key aspect of the labor market and these occupations stem from firms' choices about how to organize their production. I build a tractable theoretical many-to-one assignment model with endogenous structure choice that allows me to tackle to question of how structure choice shapes sorting. Firms choose how many layers they want to organize their production in, so each job is indexed by a pair of firm productivity and its position in the firm hierarchy. I find that this model induces nontrivial sorting patterns that may differ in each dimension of job characteristics (productivity or position in the hierarchy). This model provides a parsimonious way of comparing workers across different jobs. I also provide a condition for positive sorting, namely that the importance of high layers cannot be too different from low layers inside the firm. I also show that this model is capable of matching some empirical facts from the literature and can easily be extended to account for peer effects and search frictions.

In this paper, we build a model of the labor market with search frictions in which workers choose how much to invest in a multidimensional set of skills before entering the labor force. We show that search frictions have important consequences for skill allocation, distorting skill choices and affecting the quality of matches in the labor market. Workers become less specialized as a way to insure against labor market risk, reducing the match value between workers and firms. This induces a novel type of cost of search frictions, which we call skill distortion. We propose a method to separately identify the output cost of skill distortion in our model. We show it is quantitatively relevant and that search frictions account for around one third of total mismatch when compared to preference heterogeneity. We also show that pre-labor market skill accumulation can have important consequences for the design of unemployment insurance policy by endogenously reducing mismatch in response to more generous insurance benefits.

Banks compete in retail loan markets while simultaneously acting as trading partners in interbank funding markets. This paper analyzes the interaction between imperfect competition in loan markets and decentralized interbank trading, focusing on the Fed Funds market where banks borrow and lend reserves. I show that conditions in the loan market feed directly into the interbank market: when banks with market power expand lending, they increase their liquidity needs and impose higher funding costs on competitors, effectively creating endogenous shocks to the demand for reserves. These shocks alter bargaining outcomes in the interbank market and amplify the pass-through from policy instruments, such as interest on reserves and the discount window rate, to the effective federal funds rate. The result is excessive lending relative to the planner’s allocation and a novel inefficiency in monetary transmission. Restoring efficiency requires targeted interventions that neutralize loan market markups.