Determinants and Impact of Subcontracting: Evidence from India’s Informal Manufacturing Sector

Arbeitspapier

There are two divergent perspectives on the impact of subcontracting on firms in the informal sector. According to the benign view, formal sector firms prefer linkages with relatively modern firms in the informal sector, and subcontracting enables capital accumulation and technological improvement in the latter. According to the exploitation view, formal sector firms extract surplus from stagnant, asset-poor informal sector firms that use cheap family labour in home-based production. However, direct, firm-level evidence on the determinants and impact of subcontracting is thus far lacking in the literature. We apply a modified Heckman selection model to Indian National Sample Survey data on informal manufacturing enterprises (2005-06). We find that home-based, relatively asset-poor, and female-owned firms are more likely to be in a subcontracting relationship. Further, we perform selectivity-corrected Oaxaca-Blinder Decomposition and calculate treatment effects to show that subcontracting benefits smaller firms, firms in industrially backward states and rural firms; it is harmful for larger firms, firms in industrially advanced states, and urban firms. Our results suggest that the effects of subcontracting are more complex than those predicted by the divergent perspectives. Policy-makers need to engage with this complexity.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Working Paper ; No. 2014-04

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Multiple or Simultaneous Equation Models: Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models ; Formal and Informal Sectors; Shadow Economy; Institutional Arrangements ; Economywide Country Studies: Asia including Middle East
• Thema: sub-contracting ; informal sector ; Heckman sample selection ; Blinder-Oaxaca de- composition

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Basole, Amit ; Basu, Deepankar ; Bhattacharya, Rajesh
• Ereignis: Veröffentlichung
• (wer): University of Massachusetts, Department of Economics
• (wo): Amherst, MA
• (wann): 2014

Weitere Informationen

• Handle: http://hdl.handle.net/10419/105782
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ