Nævdal, Eric; Wagner, Martin - 2005
and Blanchard (1994). Aghion and Blanchard only present an 'approximate' solution which entails a constant unemployment … rate in what they call a turnpike approximation. We show that optimal unemployment paths have two features. First …, unemployment is increasing up to a certain point in time, when, second, the remaining inefficient state sector is closed down. At …