Firms' use of outside contractors: Theory and evidence

KG Abraham, SK Taylor - Journal of labor economics, 1996 - journals.uchicago.edu
KG Abraham, SK Taylor
Journal of labor economics, 1996journals.uchicago.edu
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' …
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.
The University of Chicago Press