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Title:Equilibrium unemployment with outsourcing under labour market imperfections PDF Logo
Authors:Koskela, Erkki
Stenbacka, Rune
Issue Date:2007
Series/Report no.:CESifo working paper 1892
Abstract: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.
JEL:E23
E24
J51
J64
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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