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Title:Equilibrium unemployment with outsourcing and wage solidarity under labour market imperfections PDF Logo
Authors:Koskela, Erkki
Stenbacka, Rune
Issue Date:2007
Series/Report no.:CESifo working paper 1988
Abstract: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.
JEL:E23
E24
J31
J51
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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