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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.

Suggested Citation

  • Katharine G. Abraham & Susan K. Taylor, 1993. "Firms' Use of Outside Contractors: Theory and Evidence," NBER Working Papers 4468, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:4468
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    More about this item

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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