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Outsourcing, Unemployment and Welfare Policy

Christian Keuschnigg and Evelyn Ribi

No 2452, CESifo Working Paper Series from CESifo Group Munich

Abstract: The paper investigates the consequences of outsourcing of labor intensive activities to low-wage economies. This trend challenges the two basic functions of the welfare state, redistribution and social insurance when private unemployment insurance markets are missing. The main results are: (i) outsourcing raises unemployment and labor income risk of unskilled workers; (ii) it increases inequality among high- and low-income groups; and (iii) the gains from outsourcing can be made Pareto improving by using a redistributive linear income tax if redistribution is initially not too large. We finally derive the welfare optimal redistribution and unemployment insurance policies.

Keywords: outsourcing; unemployment; social insurance; redistribution (search for similar items in EconPapers)
JEL-codes: F23 H21 J64 J65 L23 (search for similar items in EconPapers)
Date: 2008
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Related works:
Journal Article: Outsourcing, unemployment and welfare policy (2009) Downloads
Working Paper: Outsourcing, Unemployment and Welfare Policy (2007) Downloads
Working Paper: Outsourcing, Unemployment and Welfare Policy (2007) Downloads
Working Paper: Outsourcing, Unemployment and Welfare Policy (2007) Downloads
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