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Firms' Use of Outside Contractors: Theory and Evidence

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  • Katharine G. Abraham
  • Susan K. Taylor

Abstract

A firm's decision to contract out for business support services may be influenced by the wage and benefit savings it could realize, the volatility of its output demand and the availability of specialized skills possessed by the outside contractor. Analysis of newly-available establishment-level data shows that all three of these factors help to explain observed contracting behavior. The reported empirical findings are relevant both for understanding the recent growth in business support service contracting and for understanding firms' relationships with their own employees.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4468.

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Date of creation: Sep 1993
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Publication status: published as Journal of Labor Economics, Vol. 14, no. 3 (July 1996): 394-424.
Handle: RePEc:nbr:nberwo:4468

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  1. Charles Brown, 1990. "Firms' choice of method of pay," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 43(3), pages 165-182, February.
  2. Yellen, Janet L, 1984. "Efficiency Wage Models of Unemployment," American Economic Review, American Economic Association, vol. 74(2), pages 200-205, May.
  3. Fay, Jon A & Medoff, James L, 1985. "Labor and Output over the Business Cycle: Some Direct Evidence," American Economic Review, American Economic Association, vol. 75(4), pages 638-55, September.
  4. Lawrence F. Katz, 1986. "Efficiency Wage Theories: A Partial Evaluation," NBER Working Papers 1906, National Bureau of Economic Research, Inc.
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