Resource title

Equilibrium unemployment with outsourcing and wage solidarity under labour market imperfections

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Resource description

We evaluate the effects of outsourcing and wage solidarity on wage formation and equilibrium unemployment in a heterogeneous labour market, where wages are determined by a monopoly labour union. We find that outsourcing promotes the wage dispersion between the high-skilled and low-skilled workers. When the labour union adopts a solidaristic wage policy, it will magnify, and not dampen, this tendency. Further, higher outsourcing will increase equilibrium unemployment among the high-skilled workers, whereas it will reduce it among the low-skilled workers. Overall, outsourcing will reduce economy-wide equilibrium unemployment under the reasonable condition that the proportion of high-skilled workers is sufficiently low.

Resource author

Erkki Koskela, Rune Stenbacka

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/26033

Resource license

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