Does International Outsourcing Really Lower Workers' Income?
AbstractWe 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.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4942.
Length: 27 pages
Date of creation: May 2010
Date of revision:
Publication status: published in: Journal of Labor Research. 2011, 32 (1), 21 - 38
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Find related papers by JEL classification:
- E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- J82 - Labor and Demographic Economics - - Labor Standards - - - Labor Force Composition
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-05-22 (All new papers)
- NEP-BEC-2010-05-22 (Business Economics)
- NEP-LAB-2010-05-22 (Labour Economics)
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