The macroeconomy has a long-run equilibrium natural rate of unemployment and GDP from which unanticipated counter-cyclical policy can scarcely nudge the economy.
In Mr Tulip's view, a good part of the difference between the low equilibriumrate of unemployment in America (and Britain) and the much higher rates in continental Europe can be attributed to Europe's higher minimum wages.
So strong is this indirect effect, on his calculations, that the gradual fall in the relative value of America's minimum wage over the past 20 years is capable of explaining 1.5 percentage points of the fall in the country's equilibriumrate of unemployment over the same period.