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Can Profit Sharing Lower Flexible Outsourcing? A Note

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  • Koskela, Erkki

    ()
    (University of Helsinki)

  • König, Jan

    ()
    (Free University of Berlin)

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    Abstract

    We analyze the following question associated with flexible outsourcing under imperfect domestic labour market: How does the implementation of profit sharing influence flexible outsourcing? We show that in general profit sharing has a negative effect on low skilled wage and thus an outsourcing decreasing character. However due to labour union determination of effort a constant effort level will result so that in this case firm's optimal choice of profit sharing is zero.

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    Bibliographic Info

    Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4063.

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    Length: 19 pages
    Date of creation: Mar 2009
    Date of revision:
    Handle: RePEc:iza:izadps:dp4063

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    Keywords: flexible outsourcing; profit sharing; labour market imperfection;

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