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Title:The role of profit sharing in a dual labour market with flexible outsourcing PDF Logo
Authors:Koskela, Erkki
König, Jan
Issue Date:2008
Series/Report no.:IZA discussion papers 3876
Abstract:We analyze the following questions associated with flexible outsourcing under partly imperfect dual domestic labour markets, where high skilled workers participate in firm's profit via profit sharing: How does the implementation of profit sharing influence flexible outsourcing? What is the relationship between outsourcing cost, profit sharing and wages? We show that profit sharing has a positive effect on low skilled wage and thus an outsourcing enhancing character. The wages of both types of labour are negatively correlated and lower outsourcing cost can increase the wage dispersion by decreasing the low skilled wage and raising the high skilled wage. The overall effect of profit sharing on high skilled wage is ambiguous due to a positive direct effect and a negative indirect effect via the low skilled wage.
Subjects:Flexible outsourcing
dual labour market
profit sharing
labour market imperfection
employee effort
JEL:E23
Persistent Identifier of the first edition:urn:nbn:de:101:1-20081217131
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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