TY  - RPRT
        AU  - Koskela, Erkki
AU  - Stenbacka, Rune
        TI  - Equilibrium Unemployment with Outsourcing under Labour Market Imperfections
        PY  - 2007/Feb/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 2628
        UR  - https://www.iza.org/publications/dp2628
        AB  - 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.
        KW  - labour market imperfections
KW  - equilibrium unemployment
KW  - outsourcing
        ER  -