Using nationally representative survey data of Indian manufacturing enterprises spanning the period 1995–2006, we analyze the link between formal sector subcontracting and informal sector employment. A novelty in our analysis is that this relationship is allowed to differ between modern and traditional segments of the informal sector. We show that formal sector subcontracting is positively related to employment growth only in the most modern segments of the informal sector. Increased subcontracting cannot explain the persistently high employment in traditional informal manufacturing activities in India. Instead, subcontracting can contribute to job creation in relatively modern segments of the informal sector. JEL codes: J21, O14, O17
CITATION STYLE
Moreno-Monroy, A. I., Pieters, J., & Erumban, A. A. (2014). Formal sector subcontracting and informal sector employment in Indian manufacturing. IZA Journal of Labor and Development, 3(1). https://doi.org/10.1186/s40175-014-0022-2
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