Antràs, Pol, Elhanan Helpman, and Daron Acemoglu. 2007. Contracts and Technology Adoption. American Economic Review 97, no. 3: 916-43.
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.
Notes:Published versions have been posted with the written permission of the journals where they appeared. Standard copyright rules apply. Please download and print for personal use only. Daron Acemoglu's website. Elhanan Helpman's website