Natural rate of unemployment:
a) Suppose that Congress passes legislation making it more difficult for firms to fire workers. (An example is a law requiring several months of severance pay for fired workers.) If this legislation reduces the rate of job separation without affecting the rate of job finding, how would the natural rate of unemployment change?
b) Do you think it’s plausible that the legislation would not affect the job finding rate? Briefly explain why or why not.
c) This question is actually more typical of policy debates in Europe than in the U. S. For example, it’s notoriously difficult for firms to fire workers in many European countries. How might this be a factor in the higher natural rate of unemployment that is often estimated for those countries?
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Natural rate of unemployment:
a) Suppose that Congress passes legislation making it more...
a) Suppose that Congress passes legislation making it more...
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