International labour mobility and unemployment
We develop a two-country labour-market model characterised by union wage-bargaining, in which the unemployed incur individual-specific costs of seeking work abroad. We explore the effects on equilibrium unemployment in each country of changes in union bargaining strength, the ratio of unemployment benefits to wages, and employers' willingness to hire foreign workers. Unfavourable labour-market institutions increase unemployment abroad as well as at home. We find that no country has an incentive to internationalise its own labour market unilaterally, because all the employment gains spill over abroad, which gives countries a strong incentive to co-ordinate on internationalisation.
|Date of creation:||04 Jun 2003|
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