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...

While a widespread consensus exists among macroeconomists that the German labour market reforms in 2003-2005 have successfully contributed to the decline of the unemployment rate, critics claim that the reforms led to wage restraint and consequently consumption dampening accompanied by...