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http://ssrn.com/abstract=727136
 
 

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Contracts and the Division of Labor


Daron Acemoglu


Massachusetts Institute of Technology (MIT) - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Pol Antras


Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Elhanan Helpman


Harvard University - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

May 2005

NBER Working Paper No. w11356

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.

Number of Pages in PDF File: 38

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Date posted: December 13, 2006  

Suggested Citation

Acemoglu, Daron and Antras, Pol and Helpman, Elhanan, Contracts and the Division of Labor (May 2005). NBER Working Paper No. w11356. Available at SSRN: http://ssrn.com/abstract=727136

Contact Information

Daron Acemoglu (Contact Author)
Massachusetts Institute of Technology (MIT) - Department of Economics ( email )
50 Memorial Drive
Room E52-380b
Cambridge, MA 02142
United States
617-253-1927 (Phone)
617-253-1330 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Pol Antras
Harvard University - Department of Economics ( email )
Littauer Center
Room 230
Cambridge, MA 02138
United States
617-495-1236 (Phone)
617-495-8570 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Elhanan Helpman
Harvard University - Department of Economics ( email )
Littauer Center
Cambridge, MA 02138
United States
617-495-4690 (Phone)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
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