Unemployment in an Interdependent World



0.4


Country 2, Real wages

1.25-.

1.2-

1.15-

1.1 -

1.05-

1 -

0.95-

0.9

0.85

0

15

30

0.8   60

45

b1

τ (%)


Figure A1: Country 1 labor market regulation, trade costs, and real wages [on vertical
axis] in countries 1 and 2 (=3).

A2 Wage effects

As we have demonstrated in the main text, the magnitude of the spill-over crucially
depends on the level of real wage flexibility. Hence, in parallel to the unemployment
effects described in the main text for the individual-bargaining model, we illustrate in this
Appendix the accompanying results for real wages. Due to the way how unemployment
and wages are determined in the individual-bargaining regime, real wage effects are mainly
mirror images of the unemployment effects: Whenever a policy change in one country
leads to a decrease in average productivity in its trading partners, we will not only see an
increase in unemployment in the trading partners but also a decrease in real wages.

A2.1 How domestic institutions impact outcomes world-wide

Result A1a [Globalization and labor markets]

Trade liberalization leads to higher real wages in all countries.

Result A1b [Labor market reform]

If one country increases its unemployment benefits, then real wages increase in that coun-
try.

Result A1c [Institutional spill-overs]

If one country increases its unemployment benefits, then, in all other countries, real wages
will fall.

For an illustration see Figure A1. Again Result A1a is a generalization of the results
found by Felbermayr, Prat, and Schmerer (2008) for asymmetric countries. Result A1b
stems from the fact that higher unemployment benefits increase the bargaining power of

51



More intriguing information

1. Public infrastructure capital, scale economies and returns to variety
2. Ultrametric Distance in Syntax
3. PROFITABILITY OF ALFALFA HAY STORAGE USING PROBABILITIES: AN EXTENSION APPROACH
4. Income Mobility of Owners of Small Businesses when Boundaries between Occupations are Vague
5. The name is absent
6. Optimal Rent Extraction in Pre-Industrial England and France – Default Risk and Monitoring Costs
7. MATHEMATICS AS AN EXACT AND PRECISE LANGUAGE OF NATURE
8. Palkkaneuvottelut ja työmarkkinat Pohjoismaissa ja Euroopassa
9. Ongoing Emergence: A Core Concept in Epigenetic Robotics
10. Cyber-pharmacies and emerging concerns on marketing drugs Online
11. Innovation Trajectories in Honduras’ Coffee Value Chain. Public and Private Influence on the Use of New Knowledge and Technology among Coffee Growers
12. THE ECONOMICS OF COMPETITION IN HEALTH INSURANCE- THE IRISH CASE STUDY.
13. Willingness-to-Pay for Energy Conservation and Free-Ridership on Subsidization – Evidence from Germany
14. Eigentumsrechtliche Dezentralisierung und institutioneller Wettbewerb
15. ¿Por qué se privatizan servicios en los municipios (pequeños)? Evidencia empírica sobre residuos sólidos y agua.
16. THE WAEA -- WHICH NICHE IN THE PROFESSION?
17. Testing the Information Matrix Equality with Robust Estimators
18. Elicited bid functions in (a)symmetric first-price auctions
19. The name is absent
20. Informal Labour and Credit Markets: A Survey.