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Sub-contracting and efficiency of the informal sector in India

Author

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  • Indrajit Bairagya

    (Institute for Social and Economic Change (ISEC), India)

Abstract

Firms operating on production linkages through vertical integration with other firms are generally expected to possess a secured market for their output and better accessibility to inputs. We test the hypothesis whether or not the informal firms operating on contracts with formal firms/agencies/contractors are more efficient in terms of technical efficiency vis-à-vis other firms. To test the hypothesis, the paper analyzes the efficiency performance of the informal enterprises in India across enterprises of two states (selected on the basis of level of development) using two stage Data Envelopment Analysis technique. The paper uses the large sample enterprise level data of National Sample Survey Organisation. It is observed that in the developed state (Delhi) firms on contracts are less efficient, while they are more efficient in the less developed state (Orissa). The results further reveal that enforcement of regulations makes the firms more inefficient.

Suggested Citation

  • Indrajit Bairagya, 2013. "Sub-contracting and efficiency of the informal sector in India," Journal of Developing Areas, Tennessee State University, College of Business, vol. 47(2), pages 341-361, July-Dece.
    • Handle: RePEc:jda:journl:vol.47:year:2013:issue2:pp:341-361
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    Citations

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    Cited by:

    1. Dipa Mukherjee, 2022. "Subcontracting: A Stepping Stone for Modernisation or a Survival Strategy for Unorganised Manufacturing Sector in India?," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 65(4), pages 1155-1177, December.
    2. Amit Basole & Deepankar Basu & Rajesh Bhattacharya, 2014. "Determinants and Impact of Subcontracting: Evidence from India’s Informal Manufacturing Sector," UMASS Amherst Economics Working Papers 2014-04, University of Massachusetts Amherst, Department of Economics.
    3. Amit Basole & Deepankar Basu & Rajesh Bhattacharya, 2014. "Determinants and Impact of Subcontracting: Evidence from India’s Informal Manufacturing Sector," Working Papers 2014_08, University of Massachusetts Boston, Economics Department.

    More about this item

    Keywords

    Informal sector; Sub-contracting; Determinants of Efficiency; Developed and Developing States;
    All these keywords.

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy

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