Contractors’ Asymmetric Bargaining Power and the Impact on Subcontractors’ Wages

다국어 초록 (Multilingual Abstract)

This study investigates the wage differentials caused by the differences in bargaining power that reflect the hierarchical structure between buyers and suppliers of intermediate goods. It uses novel data that includes firm-level information on whether or not a firm is a subcontractor and whether prime contractors have requested unit-price reductions from subcontractors, and, if so, how these subcontractors respond to these contractors’ unfair requests. The main findings are that subcontractors’ wages are much lower than those of prime contractors, even when controlling for firm size and other characteristics. This is closely related to contractors with asymmetric bargaining power unfairly transferring costs to subcontractors. We also find that the negative impact of unfair unit-price reductions on subcontractors’ wages tends to be more pronounced when their sales in proportion to those of top-tier contractors are relatively large.

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