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Payments in Kind

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  • Ellingsen, Tore

    ()
    (Dept. of Economics, Stockholm School of Economics)

Abstract

Payments in kind pose an enduring and empirically important puzzle. The paper provides a formalization of the popular view that payment in kind are due to financial constraints. The key assumption is that buyers' liquidity is private information. Buyers who are financially constrained may prove their hardship by making part of the payment in kind. The paper models explicitly the credit market imperfections which lead to payments in kind and yields predictions which are consistent with a number of empirical observations. In particular, it offers a coherent explanation for the recent explosion of barter in Russia and other former Soviet republics.

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Bibliographic Info

Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 244.

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Length: 28 pages
Date of creation: 09 Jun 1998
Date of revision: 10 Feb 2000
Handle: RePEc:hhs:hastef:0244

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Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Phone: +46-(0)8-736 90 00
Fax: +46-(0)8-31 01 57
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Web page: http://www.hhs.se/
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Related research

Keywords: In-kind payments; barter; countertrade; financial constraints; price discrimination;

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References

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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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  1. Canice Prendergast & Lars Stole, 2001. "Barter, Liquidity and Market Segmentation," CESifo Working Paper Series 586, CESifo Group Munich.
  2. Oliver Hart & John Moore, 1998. "Default And Renegotiation: A Dynamic Model Of Debt," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 1-41, February.
  3. Marin, Dalia & Schnitzer, Monika, 1997. "The Economic Institution of International Barter," CEPR Discussion Papers 1658, C.E.P.R. Discussion Papers.
  4. Bolton, Patrick & Scharfstein, David S, 1990. "A Theory of Predation Based on Agency Problems in Financial Contracting," American Economic Review, American Economic Association, vol. 80(1), pages 93-106, March.
  5. Ellingsen, Tore & Stole, Lars A., 1996. "Mandated countertrade as a strategic commitment," Journal of International Economics, Elsevier, vol. 40(1-2), pages 67-84, February.
  6. Caves, Richard E. & Marin, Dalia, 1992. "Countertrade Transactions: Theory and Evidence," Munich Reprints in Economics 3111, University of Munich, Department of Economics.
  7. Blackorby, Charles & Donaldson, David, 1988. "Cash versus Kind, Self-selection, and Efficient Transfers," American Economic Review, American Economic Association, vol. 78(4), pages 691-700, September.
  8. Smith, Janet Kiholm, 1987. " Trade Credit and Informational Asymmetry," Journal of Finance, American Finance Association, vol. 42(4), pages 863-72, September.
  9. Marin, Dalia & Schnitzer, Monika, 1994. "Tying Trade Flows: A Theory of Countertrade," CEPR Discussion Papers 946, C.E.P.R. Discussion Papers.
  10. Bengt Holmstrom & Jean Tirole, 1996. "Private and Public Supply of Liquidity," NBER Working Papers 5817, National Bureau of Economic Research, Inc.
  11. Marin, Dalia & Schnitzer, Monika, 2005. "Disorganization and financial collapse," Munich Reprints in Economics 19258, University of Munich, Department of Economics.
  12. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-54, August.
  13. Chan, Raissa & Hoy, Michael, 1991. "East--West joint ventures and buyback contracts," Journal of International Economics, Elsevier, vol. 30(3-4), pages 331-343, May.
  14. Brennan, Michael J & Maksimovic, Vojislav & Zechner, Josef, 1988. " Vendor Financing," Journal of Finance, American Finance Association, vol. 43(5), pages 1127-41, December.
  15. Canice Prendergast & Lars A. Stole, 1996. "Non-Monetary Exchange Within Firms and Industry," NBER Working Papers 5765, National Bureau of Economic Research, Inc.
  16. Timothy J. Kehoe & Nobuhiro Kiyotaki & Randall Wright, 1991. "More on money as a medium of exchange," Staff Report 140, Federal Reserve Bank of Minneapolis.
  17. Daniel Kaufman & Dalia Marin, 1998. "Disorganization, financial squeeze, barter," William Davidson Institute Working Papers Series 165, William Davidson Institute at the University of Michigan.
  18. Choi, Chong J. & Maldoom, Daniel, 1992. "A simple model of buybacks," Economics Letters, Elsevier, vol. 40(1), pages 77-82, September.
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Citations

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Cited by:
  1. Canice Prendergast & Lars Stole, 2001. "Barter, Liquidity and Market Segmentation," CESifo Working Paper Series 586, CESifo Group Munich.
  2. Guido Friebel & Sergei Guriev, 1999. "Why Russian Workers Do Not Move: Attachment of Workers Through In-Kind Payments," William Davidson Institute Working Papers Series 283, William Davidson Institute at the University of Michigan.
  3. Sergei Guriev & Dmitry Kvassov, 2000. "Barter for price discrimination? A theory and evidence from Russia," Working Papers w0007, Center for Economic and Financial Research (CEFIR).
  4. Brana, Sophie & Maurel, Mathilde, 1999. "Barter in Russia: Liquidity Shortage Versus Lack of Restructuring," CEPR Discussion Papers 2258, C.E.P.R. Discussion Papers.
  5. Jose Noguera & Susan Linz, 2003. "A Theoretical Model of Barter in Russia," CERGE-EI Working Papers wp207, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  6. Richard B. Goud Jr., 2002. "Inter-Firm Non-Monetary Transactions in Russia: A Literature Review," Development and Comp Systems 0207001, EconWPA.
  7. Guriev, Sergei & Kvassov, Dmitry, 2000. "Barter For Price Discrimination?," CEPR Discussion Papers 2449, C.E.P.R. Discussion Papers.
  8. Sergei Guriev & Dmitry Kvassov, 2000. "Price Discrimination Through Barter: A Theory and Evidence from Russia," Econometric Society World Congress 2000 Contributed Papers 0397, Econometric Society.

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