In this paper fiscal policy is examined for an open economy characterised by unemployment due to efficiency wages. We …

, profit sharing, and equilibrium unemployment depending on whether in other industries profit share is or is not a part of the …. Under flexible profit sharing wage is higher if optimal profit share is small enough. For equilibrium unemployment, we find … that if there is no profit sharing in other industries, outsourcing will decrease the unemployment rate. But if profit …

unemployment. The optimal profit share, which the firms use as a wage-moderating commitment device, is below the bargaining power … reduce equilibrium unemployment, because it induces both higher wage mark-ups and lower optimal profit shares. …

outsourcing cost, profit sharing and equilibrium unemployment, when profit sharing is also a part of the compensation schemes in … wage effect. For equilibrium unemployment the effects of outsourcing cost and profit sharing are ambiguous both in case of … the absence or presence of outsourcing and in this case lower outsourcing cost will decrease unemployment. …