Equilibrium unemployment with outsourcing and wage solidarity under labour market imperfections

Erkki Koskela and Rune Stenbacka

European Economic Review, 2010, vol. 54, issue 3, 376-392

Abstract: We evaluate the effects of outsourcing and wage solidarity on wage formation and equilibrium unemployment in a heterogeneous labour market, where wages are determined by a monopoly labour union. We find that outsourcing promotes the wage dispersion between the high- and low-skilled workers. When the labour union adopts a solidaristic wage policy, it will dampen this tendency. Further, higher outsourcing will increase equilibrium unemployment among the high-skilled workers, whereas it will reduce it among the low-skilled workers. Overall, outsourcing will reduce economy-wide equilibrium unemployment under the reasonable condition that the proportion of high-skilled workers is sufficiently low.

Keywords: Outsourcing; Wage; solidarity; Labour; market; imperfections; Equilibrium; unemployment (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (18)

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Related works:
Working Paper: Equilibrium Unemployment with Outsourcing and Wage Solidarity under Labour Market Imperfections (2007)
Working Paper: Equilibrium Unemployment with Outsourcing and Wage Solidarity Under Labour Market Imperfections (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:54:y:2010:i:3:p:376-392

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