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Contracts and the Division of Labor

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  • Daron Acemoglu
  • Pol Antràs
  • Elhanan Helpman

Abstract

We develop a tractable framework for the analysis of the relationship between contractual incompleteness, technological complementarities, and technology adoption. In our model a firm chooses its technology and investment levels in contractible activities by suppliers of intermediate inputs. Suppliers then choose investments in noncontractible activities, anticipating payoffs from an ex post bargaining game. We show that greater contractual incompleteness leads to the adoption of less advanced technologies and that the impact of contractual incompleteness is more pronounced when there is greater complementary among the intermediate inputs. We study a number of applications of the main framework and show that the mechanism proposed in the paper can generate sizable productivity differences across countries with different contracting institutions and that differences in contracting institutions lead to endogenous comparative advantage differences.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11356.

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Date of creation: May 2005
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Handle: RePEc:nbr:nberwo:11356

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Citations

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Cited by:
  1. Macchiavello, Rocco, 2007. "Financial Constraints and the Costs and Benefits of Vertical Integration," CEPR Discussion Papers 6104, C.E.P.R. Discussion Papers.
  2. Benjamin Bental & Dominique Demougin, 2006. "Institutions, Bargaining Power and Labor Shares," SFB 649 Discussion Papers SFB649DP2006-009, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  3. Daron Acemoglu & Pol Antràs & Elhanan Helpman, 2007. "Contracts and Technology Adoption," American Economic Review, American Economic Association, vol. 97(3), pages 916-943, June.
  4. Pfeiffer, Friedhelm, 2005. "Existenzgründungen: Ein Weg zur Beschäftigungsförderung?," ZEW Discussion Papers 05-71, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  5. Nunn, Nathan, 2007. "Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade," Scholarly Articles 4686801, Harvard University Department of Economics.
  6. 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.
  7. Bental, Benjamin & Demougin, Dominique, 2010. "Declining labor shares and bargaining power: An institutional explanation," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 443-456, March.
  8. Raouf BOUCEKKINE & Patricia, CRIFO & Claudio, MATTALIA, 2007. "Technological Progress, Organizational Change and the Size of the Human Resources Departement," Discussion Papers (ECON - Département des Sciences Economiques) 2007047, Université catholique de Louvain, Département des Sciences Economiques.
  9. 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.

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