Can Profit Sharing Lower Flexible Outsourcing? A Note

22 Pages Posted: 15 Apr 2009

See all articles by Erkki Koskela

Erkki Koskela

University of Helsinki - Department of Political and Economic Studies; CESifo (Center for Economic Studies and Ifo Institute); Bank of Finland - Research Department; IZA Institute of Labor Economics

Jan Koenig

Free University of Berlin (FUB)

Multiple version iconThere are 2 versions of this paper

Date Written: April 1, 2009

Abstract

We analyze the following question associated with flexible outsourcing under imperfect domestic labour market: How does the implementation of profit sharing influence flexible outsourcing? We show that in general profit sharing has a negative effect on low skilled wage and thus an outsourcing decreasing character. However due to labour union determination of effort a constant effort level will result so that in this case firm’s optimal choice of profit sharing is zero.

Keywords: flexible outsourcing, profit sharing, labour market imperfection

JEL Classification: E24, J23, J33, J51, J82

Suggested Citation

Koskela, Erkki and Koenig, Jan, Can Profit Sharing Lower Flexible Outsourcing? A Note (April 1, 2009). CESifo Working Paper Series No. 2606, Available at SSRN: https://ssrn.com/abstract=1379117 or http://dx.doi.org/10.2139/ssrn.1379117

Erkki Koskela (Contact Author)

University of Helsinki - Department of Political and Economic Studies ( email )

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Bank of Finland - Research Department ( email )

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IZA Institute of Labor Economics

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Jan Koenig

Free University of Berlin (FUB) ( email )

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Berlin, Berlin 14195
Germany

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