Does International Outsourcing Really Lower Workers' Income?

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

No 4942, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We analyze the impact of international outsourcing on income, if the domestic labor market is imperfect. We distinguish in our analysis between the case where the parties negotiate over the wage only and where they negotiate over both wage and profit share. We find that in the first case outsourcing will reduce (increase) workers' income, if the labor union’s bargaining power is sufficiently high (low) and outsourcing will increase workers' income in the second case. For the amount of optimal international outsourcing, we find that it is in a pure wage bargaining system positively (negatively) affected by a sufficiently high (low) labor union's bargaining power, while in a wage and profit share bargaining system, a higher union's bargaining power decreases the optimal amount of outsourcing.

Keywords: strategic outsourcing; labor market imperfection; profit sharing (search for similar items in EconPapers)
JEL-codes: E23 E24 J23 J33 J82 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2010-05
New Economics Papers: this item is included in nep-bec and nep-lab
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Published - published in: Journal of Labor Research, 2011, 32 (1), 21-38

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Journal Article: Does International Outsourcing Really Lower Workers’ Income? (2011)
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