Can Profit Sharing Lower Flexible Outsourcing? A Note

19 Pages Posted: 30 Mar 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 Berlin

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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. IZA Discussion Paper No. 4063. Available at SSRN: https://ssrn.com/abstract=1369809

Erkki Koskela (Contact Author)

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

P.O. Box 54
FIN-00014 Helsinki
Finland
+358 9 191 8894 (Phone)
+358 9 191 8877 (Fax)

HOME PAGE: http://www.cesifo.de/servlet/page?_pageid=56&_dad=portal30&_schema=PORTAL30&pa_id=7298

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Bank of Finland - Research Department ( email )

P.O. Box 160
FIN-00101 Helsinki
Finland

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Jan Koenig

Free University Berlin ( email )

Boltzmannstr. 20
Berlin, 14195
Germany

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