Firm adjustment, employment and sub-contracting

Edward J. Amadeo (), João Carlos Scandiuzzi () and Valéria Pero ()

Brazilian Journal of Political Economy, 1996, vol. 16, issue 1, 20-37

Abstract: This article analyses the impact of sub-contracting on the labor market and theinefficiency that may result from it. Sub-contracting is partially associated with the increase inservices employment and the decrease in manufacturing employment in the early 1990s. Thus,sub-contracting may decrease job quality and incentives to human capital accumulation, sinceservices tend to value human capital less than manufacturing and have more informal andunstable labor relations. This scenario may deteriorate if the sub-contracted firms face creditconstraints. Due to the existence of externalities, investment in human capital would be sub--optimal even if contracting firms were willing to invest in the sub-contracted ones. JEL Classification: J23; J81; J01.

Keywords: Outsourcing; labor demand; working conditions; human capital (search for similar items in EconPapers)
Date: 1996
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