Abstract
Beginning in 2007, major subsidies and regulations intended to help the poor and unemployed were changed in more than a dozen ways. Many of these changes were reasonable reactions to economic events, with the intention of helping people endure the recession. But the increased redistribution itself also altered the path of the economy—and created employment losses according to age, skill and family composition—by dulling incentives for people to maintain their own living standards. This book presents evidence contradicting the Keynesian notions that work incentives suddenly stop mattering during a recession, or when the interest rate on Federal Funds approaches zero. This book uses prior results from labor economics and public finance to estimate that the labor market contracted two to three times more than it would have if redistribution policies had remained constant. In doing so, it offers novel interpretations of the interplay between unemployment and financial markets during the Great Recession of 2008–9.
http://www.oxfordscholarship.com/view/10.1093/acprof:oso/9780199942213.001.0001/acprof-9780199942213
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