Wages and Contracting Out: Does the Law of One Price Hold?

17 Pages Posted: 7 Feb 2008

See all articles by Samuel Berlinski

Samuel Berlinski

Inter-American Development Bank (IDB) - Research Department


We find that, conditioning on industry of assignment, cleaners and security guards who participate in activities organized by contract companies earn 15 and 17 per cent less, respectively, than workers in those activities organized in-house. These estimates are hardly affected by the inclusion of a set of jointly statistically significant exogenous variables. We can expect that most of the productive traits that characterize a task are transferred to the contractor in the process of contracting out a cleaning or security task. Thus, our findings are hard to rationalize by a simple competitive labour market setting where the law of one price holds.

Suggested Citation

Berlinski, Samuel, Wages and Contracting Out: Does the Law of One Price Hold?. British Journal of Industrial Relations, Vol. 46, No. 1, pp. 59-75, March 2008, Available at SSRN: https://ssrn.com/abstract=1090668 or http://dx.doi.org/10.1111/j.1467-8543.2007.00665.x

Samuel Berlinski (Contact Author)

Inter-American Development Bank (IDB) - Research Department ( email )

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Washington, DC 20577
United States

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