Profit Sharing, Wage Formation and Flexible Outsourcing under Labor Market Imperfection

Erkki Koskela and Jan König ()
Additional contact information
Jan König: Free University of Berlin

No 4707, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We combine profit sharing and outsourcing, if the wage for worker is decided by a labor union to analyze how does the implementation of profit sharing affect individual effort and the bargained wage and thus outsourcing? We find that profit sharing and the wage level have an individual effort-augmenting effect and therefore increase productivity. We also find that the wage effect of profit sharing is ambiguous. There is a wage decreasing substitution effect, but on the other hand, there is a wage increasing effect via labor demand elasticity so that outsourcing and employment effects are also ambiguous.

Keywords: labor market imperfection; flexible outsourcing; profit sharing; employee effort (search for similar items in EconPapers)
JEL-codes: E23 E24 J23 J33 J82 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2010-01
New Economics Papers: this item is included in nep-bec, nep-lab and nep-mac
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Published - published in: Review of International Economics, 2012, 20 (1), 18-28

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Working Paper: Profit Sharing, Wage Formation and Flexible Outsourcing under Labor Market Imperfection (2010)
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