Outsourcing, Unemployment and Welfare Policy

41 Pages Posted: 9 Jun 2008

See all articles by Christian Keuschnigg

Christian Keuschnigg

University of St. Gallen – Department of Economics (FGN-HSG); CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Evelyn Ribi

University of St. Gallen

Multiple version iconThere are 3 versions of this paper

Date Written: December 2007

Abstract

Outsourcing of labour intensive activities challenges the welfare state and undermines the protection of low-skilled workers. The stylized facts are that profits are concentrated among the high-skilled, involuntary unemployment is mostly among the low-skilled, and private unemployment insurance is missing. This paper analyzes the effectiveness of redistribution and social insurance and characterizes the optimal welfare policy when heterogeneous firms can outsource labour intensive components to low-wage economies.

Keywords: Outsourcing, redistribution, social insurance, unemployment

JEL Classification: F23, H21, J64, J65, L23

Suggested Citation

Keuschnigg, Christian and Ribi, Evelyn, Outsourcing, Unemployment and Welfare Policy (December 2007). CEPR Discussion Paper No. DP6605. Available at SSRN: https://ssrn.com/abstract=1140534

Christian Keuschnigg (Contact Author)

University of St. Gallen – Department of Economics (FGN-HSG) ( email )

Varnbuelstrasse 19
St. Gallen, 9000
Switzerland

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Evelyn Ribi

University of St. Gallen ( email )

Varnbuelstr. 14
Saint Gallen, St. Gallen CH-9000
Switzerland

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