Resource title

Equilibrium unemployment with outsourcing under labour market imperfections

Resource image

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Resource description

We study the various consequences of and the incentives for outsourcing. We argue that the wage elasticity of labour demand increases as a function of the share of outsourcing, which is a result consistent with existing empirical research. Furthermore, we show that a production mode with a higher proportion of outsourcing activity reduces the negotiated wage in the high-wage country with an imperfectly competitive labour market so that outsourcing reduces equilibrium unemployment. Finally, we characterize the optimal production mode and show that stronger labour market imperfections lead to a production mode with a higher share of outsourcing.

Resource author

Erkki Koskela, Rune Stenbacka

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/25937

Resource license

Adapt according to the presented license agreement and reference the original author.