Random thoughts on hysteresis

Let’s say you believe labor market unemployment hysteresis is strong, and you also believe that for political reasons (for better or worse) further monetary or fiscal stimulus is unlikely.  Which policies should you be more likely to support?  Should one be more inclined to limit unemployment insurance, ax the minimum wage, expand EITC, and in general decrease labor market regulation and mandates?  Should one be more likely to favor direct government hiring of the unemployed, if only at “make work” tasks at low wages, and less likely to favor projects run through third-party intermediaries, which may or may not focus on hiring the unemployed?  Let’s abolish Davis-Bacon, yes?  Let’s move away from European models, yes?

I thank J. for a useful comment on this matter.


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