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Outsourcing Cost and Tax Progression under Nash Wage Bargaining with Flexible Outsourcing

Author

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  • Koskela, Erkki

    () (University of Helsinki)

Abstract

It is analyzed the impacts of outsourcing cost and wage tax progression under labor market imperfections with Nash wage bargaining and flexible outsourcing. With sufficiently strong (weak) labor market imperfection, lower outsourcing cost has a wage-moderating (wage-increasing) effect so that there is a negative (positive) effect on equilibrium unemployment. Higher tax progression, to keep the relative tax burden per worker constant, has a wage moderating and a positive effect on employment and negative effect on outsourcing.

Suggested Citation

  • Koskela, Erkki, 2010. "Outsourcing Cost and Tax Progression under Nash Wage Bargaining with Flexible Outsourcing," IZA Discussion Papers 5097, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp5097
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    Keywords

    Nash wage bargaining; outsourcing; labor tax reform;

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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