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Contracting-out and the Interindustry Wage Structure: Do Norms of Internal Equity Matter in Wage Determination?

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  • Samuel G. Berlinski

    (Oxford University)

Abstract

This paper compares the wage of a worker performing an activity for an outside contractor with the wage that the firm contracting for this service would have paid were this worker on its payroll (i.e., working in-house). If norms of internal equity were a binding constraint, the wage paid by the outside contractor should not be expected to be identical to the in-house wage. Our results, obtained using data from the U.S. Current Population Survey and the Input-Output matrix, are consistent with the view that norms of internal equity are binding.

Suggested Citation

  • 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.
  • Handle: RePEc:ecm:wc2000:1053
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    References listed on IDEAS

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    1. George A. Akerlof & Janet L. Yellen, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 255-283.
    2. Michael P. Keane, 1993. "Individual Heterogeneity and Interindustry Wage Differentials," Journal of Human Resources, University of Wisconsin Press, vol. 28(1), pages 134-161.
    3. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-293, March.
    4. Peracchi, Franco & Welch, Finis, 1995. "How representative are matched cross-sections? Evidence from the Current Population Survey," Journal of Econometrics, Elsevier, vol. 68(1), pages 153-179, July.
    5. Abraham, Katharine G & Taylor, Susan K, 1996. "Firms' Use of Outside Contractors: Theory and Evidence," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 394-424, July.
    6. Phillips, Peter C B & Park, Joon Y, 1988. "On the Formulation of Wald Tests of Nonlinear Restrictions," Econometrica, Econometric Society, vol. 56(5), pages 1065-1083, September.
    7. William T. Dickens & Lawrence F. Katz, 1986. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc.
    8. Halvorsen, Robert & Palmquist, Raymond, 1980. "The Interpretation of Dummy Variables in Semilogarithmic Equations," American Economic Review, American Economic Association, vol. 70(3), pages 474-475, June.
    9. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    10. Harris, Milton & Raviv, Artur, 1979. "Optimal incentive contracts with imperfect information," Journal of Economic Theory, Elsevier, vol. 20(2), pages 231-259, April.
    11. Gregory, Allan W & Veall, Michael R, 1985. "Formulating Wald Tests of Nonlinear Restrictions," Econometrica, Econometric Society, vol. 53(6), pages 1465-1468, November.
    12. Thaler, Richard H, 1989. "Interindustry Wage Differentials," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 181-193, Spring.
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