Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/26033
Authors: 
Koskela, Erkki
Stenbacka, Rune
Year of Publication: 
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

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