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Spillover effects of labour market reforms in a three-country world

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  • Fries, Claudia

Abstract

I extend the model-based literature on spillover effects of labour market reforms on foreign (un-)employment by allowing for third-country effects. When the workhorse two-country model is enlarged to include a third country, a reform causes an additional indirect effect through a terms-of-trade shift between the foreign countries. To quantify the increase or reduction in the overall spillover by means of this channel, simulations based on empirically realistic scenarios are carried out. Thereby, the indirect effect turns out to be too small to overturn the direct effect or to increase it considerably. Differences in the reform spillover effects between foreign countries are mainly due to differences in characteristics which influence the size of the direct impact.

Suggested Citation

  • Fries, Claudia, 2015. "Spillover effects of labour market reforms in a three-country world," ZEW Discussion Papers 15-040, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:15040
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    More about this item

    Keywords

    spillover; labour market reforms; third-country effects; indirect effects; dynamic general equilibrium models;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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