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...

Recent theoretical literature studies how labor market reforms in one country can affect labor market outcomes in other countries, thereby rationalizing widely-held policy beliefs and empirical evidence. But what is the quantitative relevance of such spillover effects? This paper combines two...