IDEAS home Printed from https://ideas.repec.org/a/tpr/restat/v86y2004i4p911-922.html
   My bibliography  Save this article

Unemployment Benefits as a Substitute for a Conservative Central Banker

Author

Listed:
  • Rafael Di Tella

    (Harvard Business School, Harvard University, London)

  • Robert MacCulloch

    (Tanaka Business School, Imperial College, London)

Abstract

In the many years since their introduction, positive theories of inflation have rarely been tested. This paper documents a negative relationship between inflation and the welfare state (proxied by the parameters of the unemployment benefit program) that is to be expected in such theories. Because unemployment benefits make the monetary authority less concerned about the plight of the unemployed, building a welfare state has a similar effect to appointing a conservative central banker. The relationship holds in a panel of 20 OECD countries over the period 1961-1992, a region where Romer finds no evidence of commitment problems. It holds controlling for country and time fixed effects, country specific time trends, other covariates, and using a decadal panel. Interpreted as causal, the estimated effect is economically large: a 1-standard deviation decrease in benefit duration is predicted to add 1.4 percentage points onto inflation, or 31% of the standard deviation in inflation. © 2004 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Rafael Di Tella & Robert MacCulloch, 2004. "Unemployment Benefits as a Substitute for a Conservative Central Banker," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 911-922, November.
    • Handle: RePEc:tpr:restat:v:86:y:2004:i:4:p:911-922
    as

    Download full text from publisher

    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/0034653043125202
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kuhn, Andreas, 2009. "In the Eye of the Beholder: Subjective Inequality Measures and the Demand for Redistribution," IZA Discussion Papers 4360, Institute of Labor Economics (IZA).
    2. Christoph S. Weber, 2020. "The unemployment effect of central bank transparency," Empirical Economics, Springer, vol. 59(6), pages 2947-2975, December.
    3. Andreas Kuhn, 2009. "In the eye of the beholder: subjective inequality measures and the demand for redistribution," IEW - Working Papers 425, Institute for Empirical Research in Economics - University of Zurich.
    4. Rafael Di Tella & Robert MacCulloch, 2007. "Happiness, Contentment and Other Emotions for Central Banks," NBER Working Papers 13622, National Bureau of Economic Research, Inc.
    5. Andreas Kuhn, 2009. "In the Eye of the Beholder: Subjective Inequality Measures and the Demand for Redistribution," NRN working papers 2009-14, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
    6. Lina El-Jahel & Robert MacCulloch & Hamed Shafiee, 2020. "How does Monetary Policy affect welfare?," Working Papers 20_06, Motu Economic and Public Policy Research.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tpr:restat:v:86:y:2004:i:4:p:911-922. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: The MIT Press (email available below). General contact details of provider: https://direct.mit.edu/journals .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.