Resource title

Outsourcing and labor taxation in dual labor markets

Resource image

image for OpenScout resource :: Outsourcing and labor taxation in dual labor markets

Resource description

We evaluate the effects of international outsourcing and labor taxation on wage formation and equilibrium unemployment in dual labor markets. Outsourcing promotes wage dispersion between the high-skilled and low-skilled workers. Higher domestic low-skilled wage tax, higher payroll tax and lower wage tax exemption increase optimal outsourcing. Outsourcing will reduce equilibrium unemployment of low-skilled workers both in the presence and absence of labor taxation. In the presence of outsourcing, wage tax, tax exemption and payroll tax have an ambiguous effect on equilibrium unemployment. Increasing the degree of tax progression decreases the wage rate and increases the demand of low-skilled workers.

Resource author

Erkki Koskela, Panu Poutvaara

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/26378

Resource license

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