Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Role of Profit Sharing in Dual Labour Markets with Flexible Outsourcing

Contents:

Author Info

  • Koskela, Erkki

    ()
    (University of Helsinki)

  • König, Jan

    ()
    (Free University of Berlin)

Registered author(s):

    Abstract

    We combine profit sharing for high-skilled workers and outsourcing of low-skilled tasks in partly imperfect dual domestic labour markets, when the wage rate for low-skilled worker is set by a labor union, to analyze how the implementation of profit sharing influence flexible outsourcing and low-skilled labour market outcome. Profit sharing has a positive effect on the low-skilled wage and thus an outsourcing enhancing character. Profit sharing for high-skilled workers increases the low-skilled wage and helps to decrease the wage dispersion. Concerning the employment effects there is an employment reducing effect due to higher low-skilled wage, which can be offset by the employment increasing effect of higher effort of the high-skilled worker. Therefore, the employment effects of profit sharing are ambiguous.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://ftp.iza.org/dp5798.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5798.

    as in new window
    Length: 25 pages
    Date of creation: Jun 2011
    Date of revision:
    Handle: RePEc:iza:izadps:dp5798

    Contact details of provider:
    Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
    Phone: +49 228 3894 223
    Fax: +49 228 3894 180
    Web page: http://www.iza.org

    Order Information:
    Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
    Email:

    Related research

    Keywords: flexible outsourcing; profit sharing; dual labour market; employee effort;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Erkki Koskela & Ronnie Schöb, 2010. "Outsourcing of Unionized Firms and the Impact of Labor Market Policy Reforms," Review of International Economics, Wiley Blackwell, vol. 18(4), pages 682-695, 09.
    2. Fung, K. C., 1989. "Profit-sharing and European unemployment," European Economic Review, Elsevier, Elsevier, vol. 33(9), pages 1787-1798, December.
    3. Wadhwani, S. & Wall, M., 1988. "The Effects Of Profit-Sharing On Employment, Wages, Stock Returns And Productivity: Evidence From Uk Micro-Data," Papers, London School of Economics - Centre for Labour Economics 311, London School of Economics - Centre for Labour Economics.
    4. Sandra E Black & Lisa M Lynch, 2002. "What's Driving the New Economy? The Benefits of Workplace Innovation," Working Papers 02-03, Center for Economic Studies, U.S. Census Bureau.
    5. Douglas L. Kruse, 1993. "Does Profit Sharing Affect Productivity?," NBER Working Papers 4542, National Bureau of Economic Research, Inc.
    6. Holl, Adelheid, 2008. "Production subcontracting and location," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 38(3), pages 299-309, May.
    7. Holmlund, B., 1988. "Profit Sharing, Wage Bargaining, And Unemployment," Papers, Uppsala - Working Paper Series 1988l, Uppsala - Working Paper Series.
    8. Sebastian Braun & Juliane Scheffel, 2007. "A Note on the Effect of Outsourcing on Union Wages," SFB 649 Discussion Papers SFB649DP2007-034, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    9. Radner, Roy, 1986. "Repeated Partnership Games with Imperfect Monitoring and No Discounting," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 53(1), pages 43-57, January.
    10. Mary Amiti & Shang-Jin Wei, 2005. "Fear of service outsourcing: is it justified?," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 20(42), pages 308-347, 04.
    11. Kandel, E. & Lazear, E.P., 1990. "Peer Pressure and Partnerships," Papers, Rochester, Business - Managerial Economics Research Center 90-07, Rochester, Business - Managerial Economics Research Center.
    12. Davidson, Carl & Matusz, Steven J. & Shevchenko, Andrei, 2008. "Globalization and firm level adjustment with imperfect labor markets," Journal of International Economics, Elsevier, Elsevier, vol. 75(2), pages 295-309, July.
    13. Mine Zeynep Senses, 2006. "The Effects of Outsourcing on the Elasticity of Labor Demand," Working Papers 06-07, Center for Economic Studies, U.S. Census Bureau.
    14. Ingo Geishecker, 2006. "Does Outsourcing to Central and Eastern Europe Really Threaten Manual Workers' Jobs in Germany?," The World Economy, Wiley Blackwell, vol. 29(5), pages 559-583, 05.
    15. Meenakshi Rishi & Sweta C. Saxena, 2005. "Is Outsourcing Really As Bad As It Is Made To Sound? A Re- Assessment And Some Perspective," Macroeconomics, EconWPA 0508009, EconWPA.
    16. Lin, Chung-cheng & Chang, Juin-jen & Lai, Ching-chong, 2002. "Profit sharing as a worker discipline device," Economic Modelling, Elsevier, Elsevier, vol. 19(5), pages 815-828, November.
    17. Gorg, Holger & Hanley, Aoife, 2005. "Labour demand effects of international outsourcing: Evidence from plant-level data," International Review of Economics & Finance, Elsevier, Elsevier, vol. 14(3), pages 365-376.
    18. Booth, Alison L & Frank, Jeff, 1999. "Earnings, Productivity, and Performance-Related Pay," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 17(3), pages 447-63, July.
    19. Jan Rose Skaksen, 2004. "International outsourcing when labour markets are unionized," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 37(1), pages 78-94, February.
    20. Amiti, Mary & Wei, Shang-Jin, 2006. "Service Offshoring, Productivity and Employment: Evidence from the US," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5475, C.E.P.R. Discussion Papers.
    21. Jellal, Mohamed & Zenou, Yves, 2000. "A dynamic efficiency wage model with learning by doing," Economics Letters, Elsevier, Elsevier, vol. 66(1), pages 99-105, January.
    22. Cable, John & Wilson, Nicholas, 1990. "Profit-Sharing and Productivity: Some Further Evidence," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 100(401), pages 550-55, June.
    23. Weitzman, Martin L, 1987. "Steady State Unemployment under Profit Sharing," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 97(385), pages 86-105, March.
    24. Koskela, Erkki & Stenbacka, Rune, 2010. "Equilibrium unemployment with outsourcing and wage solidarity under labour market imperfections," European Economic Review, Elsevier, Elsevier, vol. 54(3), pages 376-392, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp5798. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.