The Role of Profit Sharing in Dual Labour Markets with Flexible Outsourcing

25 Pages Posted: 28 Jun 2011

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

Multiple version iconThere are 2 versions of this paper

Abstract

We combine profit sharing for high-skilled workers and outsourcing of low-skilled tasks in partly imperfect dual domestic labour markets, when the wage rate for low-skilled worker is set by a labor union, to analyze how the implementation of profit sharing influence flexible outsourcing and low-skilled labour market outcome. Profit sharing has a positive effect on the low-skilled wage and thus an outsourcing enhancing character. Profit sharing for high-skilled workers increases the low-skilled wage and helps to decrease the wage dispersion. Concerning the employment effects there is an employment reducing effect due to higher low-skilled wage, which can be offset by the employment increasing effect of higher effort of the high-skilled worker. Therefore, the employment effects of profit sharing are ambiguous.

Keywords: flexible outsourcing, profit sharing, dual labour market, employee effort

JEL Classification: J31, J33, J51

Suggested Citation

Koskela, Erkki and Koenig, Jan, The Role of Profit Sharing in Dual Labour Markets with Flexible Outsourcing. IZA Discussion Paper No. 5798. Available at SSRN: https://ssrn.com/abstract=1872746

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)

Poschinger Str. 5
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

Register to save articles to
your library

Register

Paper statistics

Downloads
13
Abstract Views
325
PlumX Metrics