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

Samuel Berlinski

British Journal of Industrial Relations, 2008, vol. 46, issue 1, 59-75

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.

Date: 2008
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https://doi.org/10.1111/j.1467-8543.2007.00665.x

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