Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/73712
Authors: 
Felbermayr, Gabriel
Larch, Mario
Wolfgang, Lechthaler
Year of Publication: 
2011
Series/Report no.: 
Ifo Working Paper 108
Abstract: 
The paper sets up a two-country asymmetric trade model with heterogeneous firms,search frictions and endogenous labor market institutions. Countries are linked by tradein goods and non-cooperatively set unemployment benefits to maximize national welfare.We show that more open and smaller economies have more generous unemploymentbenefit replacement rates as a larger fraction of the costs is borne by foreign tradingpartners. These results are in line with empirical stylized facts. Additionally, we findthat the optimal level of unemployment benefits is independent from the level of unemploymentbenefits abroad and that non-cooperatively set unemployment rates areinefficiently high.
Subjects: 
Endogenous labor market institutions
unemployment
international trade
search frictions
heterogeneous firms
JEL: 
F11
F12
F16
J64
L11
Document Type: 
Working Paper

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