Contracts and Technology Adoption
Pol Antràs, and
Elhanan Helpman. 2007. "Contracts and Technology Adoption."
American Economic Review,
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.
(JEL D86, O33)
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