@techreport{DiTella2000Rational,
abstract = {We argue that labor market institutions are endogenous. Our analysis
focuses on the government's decision to set unemployment benefits in
response to an unemployment shock in a simple, reduced-form model of
the labor market. It is found that the largest increases in benefits should
occur in economies where the adverse incentive effects of benefits are
largest. Adjustment costs of changing benefits can introduce hysteresis in
benefit setting and unemployment. Both (very) bad and good temporary
shocks (including monetary) can permanently reduce unemployment
benefits and the unemployment rate. A desirable feature of the model is
that the mechanism yielding hysteresis (which requires a concave utility
function) ceases to operate when unemployment tends to one.},
address = {Bonn},
author = {Rafael DiTella and Robert MacCulloch},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {J6; 330; Optimal unemployment benefits; hysteresis; natural rate of unemployment; Arbeitslosigkeit; Arbeitslosenversicherung; Hysteresis; Optimale Besteuerung; Schock; Anpassungskosten},
language = {eng},
number = {B 09-2000},
publisher = {ZEI},
title = {Rational institutions yield hysteresis},
type = {ZEI working paper},
url = {http://hdl.handle.net/10419/39555},
year = {2000}
}
