%0 Report
        %A Koskela, Erkki
%A Stenbacka, Rune
        %T Equilibrium Unemployment with Outsourcing under Labour Market Imperfections
        %D 2007
        %8 2007 Feb
        %I Institute of Labor Economics (IZA)
        %C Bonn
        %7 IZA Discussion Paper
        %N 2628
        %U https://www.iza.org/publications/dp2628
        %X We study both the various consequences and the incentives of outsourcing. We argue that the wage elasticity of labour demand is increasing as a function of the share of outsourcing, which is importantly a result consistent with existing empirical research. Furthermore, we show that a production mode with a higher proportion of outsourcing activity reduces the negotiated wage in the high-wage country with an imperfectly competitive labour market so that outsourcing reduces equilibrium unemployment. Finally, we characterize the optimal production mode and show that stronger labour market imperfections lead to a production mode with a higher share of outsourcing.
        %K labour market imperfections
%K equilibrium unemployment
%K outsourcing