 SUBCONTRACTING, R&D AND LABOUR PRODUCTIVITY: A THEORETICAL EXPLANATIONDibyendu Maiti () and Sugata Marjit Journal of Economic Development, 2011, vol. 36, issue 3, 1-24 Abstract: While a large body of researches discusses the effects of international subcontracting on firm dynamics, the present work deals with the similar issues of a domestic firm who subcontracts to the informal sector in a typical developing world. Theoretically, we develop a model that if the formal sector wage is higher than that of informal sector, the choice of informal sector subcontracting and in-house R&D investment appears to be alternative options to the firm to bypass expensive labour in the formal sector. We argue that the R&D and labour productivity in formal sector are highly influenced by the informal wage but not the formal sector one. Since the subcontracting can raise both supply and demand for informal workers due to a rise of formal sector wage, the movement of informal sector wage is uncertain and thereby, the formal sector R&D and labour-productivity are also ambiguous. Thus, countries with a vast segment of lowly-paid informal workers exhibit lowly-productive formal workers. Keywords: Subcontracting; Informal Wage; Poverty; Labour Productivity; R&D (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:jed:journl:v:36:y:2011:i:3:p:1-24 Access Statistics for this article Journal of Economic Development is currently edited by Sung Y. Park More articles in Journal of Economic Development from Chung-Ang Unviersity, Department of Economics Contact information at EDIRC. |
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