The environment and sources of uncertainty We consider a stationary economy There are aggregate shocks to productivity a random cost of education(how hard you find it to learn) Random arrival of job offers The match specific effect on wages Match specific effects evolve as a random walk In every period a job may be destroyed exogenouslyThe environment and sources of uncertainty • We consider a stationary economy • There are aggregate shocks to productivity. • A random cost of education (how hard you find it to learn) • Random arrival of job offers. • The match specific effect on wages • Match specific effects evolve as a random walk • In every period a job may be destroyed exogenously