In this paper, we present a simple but rigorous model of the dynamics of output and unemployment in transition. We consider a worker-entrepreneur, who is "locked in" to her current production technique, with a choice of continuing to work with it or search for a better technique. If she...

When shock therapy is politically infeasible, will gradualism work? This paper takes up this question by: (i) building a political economy model in which it makes sense; (ii) stating the relevant political economy constraint rigorously; and (iii) analyzing the question in the context of a...