Firms' Use of Outside Contractors: Theory and Evidence
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NBER Working Paper No. 4468
Issued in September 1993
NBER Program(s): LS
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.
Published: Journal of Labor Economics, Vol. 14, no. 3 (July 1996): 394-424.
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