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Limited enforcement and the organization of production

  • Erwan Quintin

This paper describes a dynamic, general equilibrium model designed to assess whether contractual imperfections in the form of limited enforcement can account for international differences in the organization of production. In the model, limited enforcement constrains some agents to operate establishments below their optimal scale. As a result, economies where contracts are enforced more efficiently tend to be richer and emphasize large scale production. Calibrated simulations of the model reveal that these effects can be large and account for a sizeable part of the observed differences in the size distribution of manufacturing establishments between Mexico and the United States. ; Economic Research Working Paper 0109

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Paper provided by Federal Reserve Bank of Dallas in its series Center for Latin America Working Papers with number 0601.

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Date of creation: 2001
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Handle: RePEc:fip:feddcl:0601
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