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Outsourcing, labor market pooling, and labor contracts

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  • Picard, Pierre M.
  • Wildasin, David E.

Abstract

This paper considers the interaction between input sharing and labor market pooling in urban areas. In particular, it examines the impact of the size of a city and business risks on the organizational structures of firms located in urban agglomerations, and it also discusses the impact of organizational structure on incentives to insure workers against income risks. It is shown that manufacturing firms suffer from a coordination game in their decision to outsource production. The existence of idiosyncratic risks causes manufacturers to refrain from outsourcing. The incentives to offer wage and employment protection to workers are more pronounced when manufacturers outsource the production of their inputs to a local market, which mitigates the impact of labor market pooling.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 70 (2011)
Issue (Month): 1 (July)
Pages: 47-60

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Handle: RePEc:eee:juecon:v:70:y:2011:i:1:p:47-60

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Web page: http://www.elsevier.com/locate/inca/622905

Related research

Keywords: Input sharing Fragmentation Outsourcing Labor market pooling Labor contracts;

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References

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Cited by:
  1. Andini, Monica & de Blasio, Guido & Duranton, Gilles & Strange, William C., 2013. "Marshallian labour market pooling: Evidence from Italy," Regional Science and Urban Economics, Elsevier, vol. 43(6), pages 1008-1022.

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