Can Profit Sharing Lower Flexible Outsourcing? A Note
22 Pages Posted: 15 Apr 2009
Date Written: April 1, 2009
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
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