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Do Temporary Workers Face Higher Wage Markdowns? Evidence from India's Automotive Sector

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  • Davide Luparello

Abstract

Contract workers constitute half of India's automotive employment but earn substantially less than permanent workers. Using ASI data (2002-2019), I develop an estimator of labor supply and demand schedules to explain this wage premium. The model features worker-type-specific discrete choice labor supply, nested CES production, Nash-Bertrand competition for contract workers, and plant-union bargaining for permanent workers. I find the premium stems entirely from higher productivity rather than differential monopsony power. While a lump-sum transfer offsetting wage markdowns would increase welfare by 14% for permanent and 12% for contract workers, it would simultaneously increase the premium by 14%, exacerbating inequality.

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  • Davide Luparello, 2025. "Do Temporary Workers Face Higher Wage Markdowns? Evidence from India's Automotive Sector," Papers 2507.08222, arXiv.org, revised Oct 2025.
    • Handle: RePEc:arx:papers:2507.08222
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    References listed on IDEAS

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