Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/25937
Authors: 
Koskela, Erkki
Stenbacka, Rune
Year of Publication: 
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

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