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...

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...