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Input Quality, Relational Contracts And International Outsourcing

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  • Eric W. Bond

Abstract

. This paper presents a Ricardian trade model in which the quality of intermediate inputs affects the productivity of labour at the final production stage. The role of contracting frictions is shown by comparing the chain of comparative advantage obtained with full information with that resulting when the quality of inputs is affected by actions that are not verifiable in court. Conditions are derived under which parties can use the potential for repeat business (relational contracts) to sustain efficient production choices. These results yield predictions for how country and industry characteristics will affect the level of contracting frictions.

Suggested Citation

  • Eric W. Bond, 2008. "Input Quality, Relational Contracts And International Outsourcing," Pacific Economic Review, Wiley Blackwell, vol. 13(4), pages 391-404, October.
    • Handle: RePEc:bla:pacecr:v:13:y:2008:i:4:p:391-404
    DOI: 10.1111/j.1468-0106.2008.00409.x
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    References listed on IDEAS

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    12. repec:hrv:faseco:4784029 is not listed on IDEAS
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    Cited by:

    1. Dionisia Tzavara & Adrienne Héritier, 2011. "Quality and Environmental Regulation: Verifying Compliance along the Supply Chain," RSCAS Working Papers 2011/16, European University Institute.
    2. Dionisia Tzavara and Adrienne Héritier, 2011. "Quality and Environmental Regulation: Verifying Compliance along the Supply Chain," EUI-RSCAS Working Papers 16, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
    3. Chaudhuri, Sarbajit & Marjit, Sugata, 2017. "International trade and quality of labour," International Review of Economics & Finance, Elsevier, vol. 49(C), pages 582-595.
    4. Tzavara Dionisia & Heritier Adrienne, 2012. "Quality and Environmental Regulation: Verifying Compliance along the Supply Chain," Business and Politics, De Gruyter, vol. 14(2), pages 1-24, August.
    5. Eric W. Bond & Yan Ma, 2013. "Learning by Doing and Fragmentation," Pacific Economic Review, Wiley Blackwell, vol. 18(5), pages 603-627, December.

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