Working Paper: NBER ID: w4773
Authors: Daniel S. Hamermesh
Abstract: I develop a model with the path of labor-market outcomes exhibiting hysteresis depending on prior labor-market policy. The results suggest that attempts to transfer policies across economies lead to surprising results even if current economic outcomes in the countries appear similar. Examples of minimum wages, optimal income maintenance, and training programs are given. The results are applied to a discussion of overtime laws and differences in days worked and weekly hours in the U.S. and Germany.
Keywords: labor market; hysteresis; policy transfer; minimum wage; overtime laws
JEL Codes: J38; J23; J31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| initial choice of policy (P) (D78) | labor market conditions (J29) |
| labor market conditions (J29) | new policy choice (P') (D78) |
| new policy choice (P') (D78) | labor market conditions (J29) |
| labor market conditions (J29) | new optimal policy (P'') (C61) |
| introduction of a minimum wage policy (w_m0) (J38) | disemployment among low-productivity workers (J65) |
| disemployment among low-productivity workers (J65) | productivity distribution (D39) |
| productivity distribution (D39) | new minimum wage (w_g0) (J38) |