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Wages and Contracting Out: Does the Law of One Price Hold?

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  • Samuel Berlinski

Abstract

We find that, conditioning on industry of assignment, cleaners and security guards who participate in activities organized by contract companies earn 15 and 17 per cent less, respectively, than workers in those activities organized in‐house. These estimates are hardly affected by the inclusion of a set of jointly statistically significant exogenous variables. We can expect that most of the productive traits that characterize a task are transferred to the contractor in the process of contracting out a cleaning or security task. Thus, our findings are hard to rationalize by a simple competitive labour market setting where the law of one price holds.

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  • Samuel Berlinski, 2008. "Wages and Contracting Out: Does the Law of One Price Hold?," British Journal of Industrial Relations, London School of Economics, vol. 46(1), pages 59-75, March.
    • Handle: RePEc:bla:brjirl:v:46:y:2008:i:1:p:59-75
    DOI: 10.1111/j.1467-8543.2007.00665.x
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    References listed on IDEAS

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    1. Samuel G. Berlinski, 2000. "Contracting-out and the Interindustry Wage Structure: Do Norms of Internal Equity Matter in Wage Determination?," Econometric Society World Congress 2000 Contributed Papers 1053, Econometric Society.
    2. Marcello Estevao & Saul Lach, 1999. "Measuring temporary labor outsourcing in U.S. manufacturing," Finance and Economics Discussion Series 1999-57, Board of Governors of the Federal Reserve System (U.S.).
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    Cited by:

    1. Corinne Perraudin & Héloïse Petit & Nadine Thèvenot & Bruno Tinel & Julie Valentin, 2009. "Inter-firm dependency and employment inequalities: Theoretical hypotheses and empirical tests," Documents de travail du Centre d'Economie de la Sorbonne 09019, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    2. Hammerling, Jessie HF, 2022. "Trends in Inter-Firm Transactions Across Industries in the U.S," Institute for Research on Labor and Employment, Working Paper Series qt9dr868wx, Institute of Industrial Relations, UC Berkeley.
    3. Deborah Goldschmidt & Johannes F. Schmieder, 2017. "The Rise of Domestic Outsourcing and the Evolution of the German Wage Structure," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(3), pages 1165-1217.
    4. Laurence Lizé, 2020. "Conditions de travail dans la sous-traitance : des salariés sous pression un questionnement sur les contours de la segmentation des emplois," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-02967180, HAL.
    5. Laurence Lizé, 2020. "Conditions de travail dans la sous-traitance : des salariés sous pression un questionnement sur les contours de la segmentation des emplois," Documents de travail du Centre d'Economie de la Sorbonne 20021, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    6. Arindrajit Dube & Ethan Kaplan, 2010. "Does Outsourcing Reduce Wages in the Low-Wage Service Occupations? Evidence from Janitors and Guards," ILR Review, Cornell University, ILR School, vol. 63(2), pages 287-306, January.
    7. Hammerling, Jessie HF, 2022. "Financial Drivers of Domestic Outsourcing: Case Study of Food Services in the San Francisco Bay Area," Institute for Research on Labor and Employment, Working Paper Series qt9sz919zw, Institute of Industrial Relations, UC Berkeley.
    8. Laurence Lizé, 2020. "Conditions de travail dans la sous-traitance : des salariés sous pression un questionnement sur les contours de la segmentation des emplois," Post-Print halshs-02967180, HAL.
    9. Danielle D. Van Jaarsveld & Hyunji Kwon & Ann C. Frost, 2009. "The Effects of Institutional and Organizational Characteristics on Work Force Flexibility: Evidence from Call Centers in Three Liberal Market Economies," ILR Review, Cornell University, ILR School, vol. 62(4), pages 573-601, July.
    10. Ochsenfeld, Fabian, 2018. "The Relational Nature of Employment Dualization: Evidence from Subcontracting Establishments," SocArXiv ta4r6, Center for Open Science.

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