Resource title

Flexible Outsourcing and the Impacts of Labour Taxation in European Welfare States

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Resource description

In European Welfare States, low-skilled workers are typically unionized, while the wage formation of high-skilled workers is more competitive. To focus on this aspect, we analyze how flexible international outsourcing and labour taxation affect wage formation, employment and welfare in dual domestic labour markets. Higher productivity of outsourcing, lower cost of outsourcing and lower factor price of outsourcing increase wage dispersion between the high-skilled and low-skilled workers. Increasing wage tax progression of low-skilled workers decreases the wage rate and increases the labour demand of low-skilled workers. It decreases the welfare of lowskilled workers and increases both the welfare of high-skilled workers and the profit of firms.

Resource author

Erkki Koskela, Panu Poutvaara

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Resource publish date

Resource language

eng

Resource content type

application/pdf

Resource resource URL

http://hdl.handle.net/10398/7696

Resource license

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