Do Temporary Workers Face Higher Wage Markdowns? Evidence from India's Automotive Sector

Davide Luparello

Papers from arXiv.org

Abstract: Are temporary workers subject to different wage markdowns than permanent workers? This paper examines productivity, output markups, and wage markdowns in India's automotive sector during 2000--2020. I develop a model integrating CES production, nested logit labor supply, and differentiated labor market conduct: Nash-Bertrand wage setting for temporary workers versus Nash bargaining for unionized permanent workers. Results reveal declining output markups as marginal costs outpace prices through productivity deceleration. Rising labor-augmenting productivity cannot offset declining Hicks-neutral productivity, reducing overall TFP. Labor market power substantially compresses worker compensation: wage markdowns persist at 40% for temporary workers and 10% for permanent workers.

Date: 2025-07
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