The Trade Off between Sclerosis and Hold Up Problems: Rhenish vs. Anglosaxon Economies

Tilburg University, CentER Working Paper No. 1999-70

26 Pages Posted: 14 Jan 2000

See all articles by Jan Boone

Jan Boone

Tilburg University - Center for Economic Research (CentER); Centre for Economic Policy Research (CEPR); TILEC

Sjak Smulders

Tilburg University - Tilburg University School of Economics and Management; University of Calgary - Department of Economics

Date Written: June 22, 1999

Abstract

This paper presents a simple model to explain the relative advantages of market economies with high turnover of firms and those with low turnover rates but long-term relationships. The two types of economies, labeled Anglosaxon and Rhenish respectively, arise as two equilibria that can simultaneously exist in the model. We show that welfare is not necessarily higher in one of the two. A trade off exists between sclerosis and a hold up problem. Our main result is that deregulation in a Rhenish economy yields smaller effects on output than in an Anglosaxon economy.

JEL Classification: J51, J63, P51

Suggested Citation

Boone, Jan and Smulders, Jacobus (Sjak) A., The Trade Off between Sclerosis and Hold Up Problems: Rhenish vs. Anglosaxon Economies (June 22, 1999). Tilburg University, CentER Working Paper No. 1999-70. Available at SSRN: https://ssrn.com/abstract=199748 or http://dx.doi.org/10.2139/ssrn.199748

Jan Boone (Contact Author)

Tilburg University - Center for Economic Research (CentER) ( email )

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Centre for Economic Policy Research (CEPR)

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TILEC ( email )

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Jacobus (Sjak) A. Smulders

Tilburg University - Tilburg University School of Economics and Management ( email )

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Tilburg, 5000 LE
Netherlands
+31 13 466 2920 (Phone)
+31 13 466 3042 (Fax)

HOME PAGE: http://www.uvt.nl/webwijs/english/show.html?anr=801585&lang=en

University of Calgary - Department of Economics ( email )

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