|
Country 1, ∆ Real wages 14-1-∙"" : ..-∙<"" ■ : '^'---.i 12- .•■•'■" ...ʃ""' 10-. : ...-: J '■■■■■.. : 8- . ∙' ' ' ; : : 6-.∙ a ^?--... : 4 - ■ ■ . : 2 ' , , . ' ■ ' : lθ^ʌ-- ... 30 ^ ' --. ,. " "' '0 >-< ∙ " ^5 15 50 ^∖ 30 70 ^ - 45 S=LJLw 90 ∙∙ τ (%) 1 1 |
Country 2, ∆ Real wages 0-^^^^^^^^^^^^^^^^Hk -2- --, '>■-.. -4-. . '∙' ' -... ■ 'i -6- ∙ ∙ ■ ': -8 - ':■■■.. ' : -10-. ' : ..■ •■ " : .----^^^ ■-. ? -”: ............... ....... . - -”].••-<:■?■ ...... j .....?': ?-Л< w^X. ■ ■ " " ` ' ` - ■ ■ " " ' ' ` ■ ■ " ' ' ' ` ' - ∙ J>-<^j 30 ^' - --. .' .. - - - .. ` J>.<r-'-''^''^^^'^^ 0 >-< " ' ' ’ ' - - . - - - " ' " . ^-----''^ 15 50 ʌ-- ^.->≤''^^ ∖-5∙ ■•--. 30 70 .. ^ 45 s=L√Lw “ - τ1 (%) 1 1 |
Figure A2: Change in real wages [on the vertical axis] as a function of centrality and size
of the “bad” country 1 for a given change of b1 from 0.4 to 0.8.
workers. A novelty is Result A1c, which is the backside of Result 1c in the main text,
stating that an increase in unemployment benefits in one country will lead to an increase in
unemployment in all other countries. This is due to the institutional spill-overs described
in detail in the main text.
A2.2 The role of geography and relative size
Result A2a [Geography and spill-overs]
As the degree of centrality of country 1 goes up, a given rise in country 1’s unemployment
benefits yields a larger real wage increase in country 1 and a larger decrease in countries
2 and 3.
Result A2b [Relative size and spill-overs]
The higher the relative size of country 1 the weaker is the increase in real wages in coun-
try 1 and the larger is the decrease in all other countries due to a rise of country 1’s
unemployment benefits.
The conditioning effects of centrality and size of country 1 are visualized in Figure A2.
Concerning trade costs, we find that the change in real wages increases in all countries.
Hence, in country 1 the increase in real wages is larger if it is more central, whereas the
decrease in real wages increases in the rest of the world. This finding roots in the fact
that with higher centrality of country 1, country 1 more easily can spill-over bad labor
market institutions.
Concerning the country size we find that an increasing size of country 1 leads to a
lower increase in real wages in country 1 but a stronger decrease in real wages in all other
countries. The explanation is similar to the one given for the effects on unemployment: If
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