Unemployment in an Interdependent World



Table 3: Unemployment spillovers: the role of real wage flexibility, country size, and
openness

z=

rigid

z = ln(pop)

z = pmr

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

b

0.118a

0.124a

-0.096

-0.160

-0.240c

0.054c

0.038

0.098a

(0.018)

(0.018)

(0.153)

(0.153)

(0.143)

(0.030)

(0.027)

(0.020)

b*

-0.007c

0.002

-0.324

-0.319

-0.382c

0.020

0.035c

-0.006

(0.004)

(0.010)

(0.213)

(0.205)

(0.202)

(0.019)

(0.019)

(0.016)

Interaction terms

z×b

0.029c

0.031b

0.035b

0.007

0.011a

(0.015)

(0.015)

(0.014)

(0.005)

(0.004)

z × b*

0.127a

0.104a

-0.003

0.001

-0.013a

-0.008c

(0.033)

(0.036)

(0.006)

(0.006)

(0.005)

(0.004)

z* × b

-0.008

-0.006

-0.001

-0.003

(0.005)

(0.005)

(0.003)

(0.003)

z* × b*

0.036c

0.032

0.038c

0.017b

0.013b

(0.021)

(0.020)

(0.020)

(0.007)

(0.006)

Other controls

Rigidity index

1.164

2.624

(1.186)

(3.296)

PMR

0.878a

0.889a

0.676c

0.370

0.804a

(0.228)

(0.222)

(0.375)

(0.359)

(0.226)

PMR*

-0.039

0.165

-0.359

0.392

-0.519

(0.250)

(0.228)

(0.427)

(0.277)

(0.413)

ln(pop)

-15.514a

-16.357a

-17.798a

-19.642a

-17.411a

-19.102a

-18.352a

(4.791)

(5.075)

(5.206)

(4.939)

(4.664)

(4.546)

(4.691)

ln(pop*)

-0.171

0.110

0.048

-0.239

-0.077

-0.315c

0.031

(0.149)

(0.278)

(0.269)

(0.146)

(0.182)

(0.164)

(0.179)

Union density

-0.024

0.005

-0.011

-0.017

0.016

0.014

-0.008

(0.032)

(0.024)

(0.023)

(0.023)

(0.026)

(0.026)

(0.024)

High corporatism

-0.102

-1.788a

-1.986a

-2.002a

-2.245a

-2.529a

-2.080a

(1.500)

(0.616)

(0.656)

(0.638)

(0.550)

(0.529)

(0.523)

EPL

0.606

0.569

-0.037

-0.031

-0.061

-0.245

0.035

(0.368)

(0.395)

(0.418)

(0.407)

(0.439)

(0.408)

(0.400)

gap

-0.589a

-0.611a

-0.630a

-0.630a

-0.633a

-0.629a

-0.621a

-0.631a

(0.040)

(0.042)

(0.043)

(0.042)

(0.043)

(0.043)

(0.043)

(0.041)

gap*

-0.002

-0.013

-0.019

-0.020

0.012

0.012

-0.038

0.010

(0.064)

(0.062)

(0.062)

(0.072)

(0.070)

(0.079)

(0.073)

(0.074)

RMSE

1.129

1.115

1.120

1.091

1.091

1.136

1.104

1.104

adj R2

0.931

0.933

0.932

0.935

0.935

0.930

0.934

0.934

F

159.4

170.7

149.4

155.7

160.4

133.4

131.6

136.0

Robust standard

errors in

parentheses,ap

< 0.01,b

p < 0.05,cp

< 0.1.

Number of observations:

397 in all

regressions. All estimations

use OLS and contain a

full set of country fixed-effects and year dummies, and an

array of orthogonal shocks (TFP, terms of trade, real interest rate, and labor demand shocks) as

additional

controls for business cycle comovements. Trade-weighted averages for foreign variables (denoted by asterisks)
are computed using
α1 = α2 = 1, δ = 1.

41



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