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Contracts and the Division of Labor

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Author Info
Daron Acemoglu
Pol Antras
Elhanan Helpman

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Abstract

We present a tractable framework for the analysis of the relationship between contract incom- pleteness, technological complementarities and the division of labor. In the model economy, a firm decides the division of labor and contracts with its worker-suppliers on a subset of activities they have to perform. Worker-suppliers choose their investment levels in the remaining activities anticipating the ex post bargaining equilibrium. We show that greater contract incompleteness reduces both the division of labor and the equilibrium level of productivity given the division of labor. The impact of contract incompleteness is greater when the tasks performed by di¤erent workers are more complementary. We also discuss the e¤ect of imperfect credit markets on the division of labor and productivity, and study the choice between the employment relationship versus an organizational form relying on outside contracting. Finally, we derive the implications of our framework for productivity di¤erences and comparative advantage across countries.

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Paper provided by Harvard - Institute of Economic Research in its series Harvard Institute of Economic Research Working Papers with number 2074.

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Date of creation: 2005
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Handle: RePEc:fth:harver:2074

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  3. Bolton, Patrick & Dewatripont, Mathias, 1994. "The Firm as a Communication Network," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 809-39, November. [Downloadable!] (restricted)
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  5. Pol Antràs, 2005. "Incomplete Contracts and the Product Cycle," American Economic Review, American Economic Association, vol. 95(4), pages 1054-1073, September. [Downloadable!]
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  6. Andrei A. Levchenko, 2004. "Institutional Quality and International Trade," IMF Working Papers 04/231, International Monetary Fund. [Downloadable!]
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  11. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November. [Downloadable!] (restricted)
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  12. repec:rus:hseeco:122439 is not listed on IDEAS
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Pfeiffer, Friedhelm, 2005. "Existenzgründungen: Ein Weg zur Beschäftigungsförderung? (Firm foundation * a way to enhance employment?)," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 38(2/3), pages 325-340. [Downloadable!]
  2. Marin, Dalia, 2006. "A New International Division of Labour in Europe: Outsourcing and Offshoring to Eastern Europe," CEPR Discussion Papers 5447, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  3. Macchiavello, Rocco, 2007. "Financial Constraints and the Costs and Benefits of Vertical Integration," CEPR Discussion Papers 6104, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  4. Raouf Boucekkine & Patricia Crifo & Claudio Mattalia, 2008. "Technological Progress, Organizational Change and the Size of the Human Resources Department," Working Papers hal-00240715_v1, HAL. [Downloadable!]
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  5. Marin, Dalia, 2005. "A New International Division of Labor in Europe: Offshoring and Outsourcing to Eastern Europe," Discussion Papers in Economics 714, University of Munich, Department of Economics. [Downloadable!]
  6. Daron Acemoglu & Pol Antràs & Elhanan Helpman, 2007. "Contracts and Technology Adoption," American Economic Review, American Economic Association, vol. 97(3), pages 916-943, June. [Downloadable!]
  7. Pfeiffer, Friedhelm, 2005. "Existenzgründungen: Ein Weg zur Beschäftigungsförderung?," ZEW Discussion Papers 05-71, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  8. Nathan Nunn, 2005. "Relationship Specificity, Incomplete Contracts and the Pattern of Trade," International Trade 0512018, EconWPA. [Downloadable!]
    Other versions:
  9. Raouf Boucekkine & Patricia Criffo & Claudio Mattalia, 2008. "Technological progress, organizational change and the size of the Human Resources Department," Working Papers 2008_20, Department of Economics, University of Glasgow. [Downloadable!]
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  10. Arnaud Costinot, 2007. "On the Origins of Comparative Advantage," University of California at San Diego, Economics Working Paper Series 2008-06, Department of Economics, UC San Diego. [Downloadable!]
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