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Inter-firm dependency and employment inequalities: Theoretical hypotheses and empirical tests

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Abstract

This article highlights the importance of power relations in inter-firm relations and analyses their impact on firms' employment management practices. We show, firstly, that the use of subcontracting creates a chain of inter-firm economic dependency because it leads the principal contractor to plan and control the activities of the subcontractors. We then advance the hypothesis that this chain of dependency influences both the skill structure and wage levels. Empirical tests carried out on French data confirm that firms that subcontract outsource execution tasks and that the hierarchy of firms impacts employees' wage levels

Suggested Citation

  • 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.
  • Handle: RePEc:mse:cesdoc:09019
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    References listed on IDEAS

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    1. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-973, July.
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    4. Pashardes, Panos, 1993. "Bias in Estimating the Almost Ideal Demand System with the Stone Index Approximation," Economic Journal, Royal Economic Society, vol. 103(419), pages 908-915, July.
    5. Andreoni,J. & Harbaugh,W.T., 2005. "Power indices for revealed preference tests," Working papers 10, Wisconsin Madison - Social Systems.
    6. Mattei, Aurelio, 2000. "Full-scale real tests of consumer behavior using experimental data," Journal of Economic Behavior & Organization, Elsevier, vol. 43(4), pages 487-497, December.
    7. William T. Harbaugh & Kate Krause & Timothy R. Berry, 2001. "GARP for Kids: On the Development of Rational Choice Behavior," American Economic Review, American Economic Association, vol. 91(5), pages 1539-1545, December.
    8. Famulari, Melissa, 1995. "A Household-Based, Nonparametric Test of Demand Theory," The Review of Economics and Statistics, MIT Press, vol. 77(2), pages 372-382, May.
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    11. Aizcorbe, Ana M, 1991. "A Lower Bound for the Power of Nonparametric Tests," Journal of Business & Economic Statistics, American Statistical Association, vol. 9(4), pages 463-467, October.
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    More about this item

    Keywords

    Subcontracting; skills; wages; power relation;

    JEL classification:

    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • J82 - Labor and Demographic Economics - - Labor Standards - - - Labor Force Composition
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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