Resource title

Flexible outsourcing, profit sharing and equilibrium unemployment

Resource image

image for OpenScout resource :: Flexible outsourcing, profit sharing and equilibrium unemployment

Resource description

We analyze the questions associated with flexible outsourcing both with committed and flexible profit sharing under imperfect domestic labour markets. How does profit sharing influence flexible outsourcing? What is the relationship between outsourcing cost, profit sharing and equilibrium unemployment, when profit sharing is also a part of the compensation schemes in other industries? In the case of committed profit sharing, outsourcing cost increases wage. Optimal flexible profit sharing is smaller than in the absence of outsourcing, but outsourcing cost and wage will have ambiguous effect on optimal flexible profit sharing. Implementing profit sharing can help to avoid outsourcing due to a direct productivity effect and a wage effect. For equilibrium unemployment the effects of outsourcing cost and profit sharing are ambiguous both in case of committed and flexible profit sharing. In the case of zero effort elasticity there is no committed or flexible profit sharing in the absence or presence of outsourcing and in this case lower outsourcing cost will decrease unemployment.

Resource author

Erkki Koskela, Jan K├Ânig

Resource publisher

Resource publish date

Resource language


Resource content type


Resource resource URL

Resource license

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