Working Paper: NBER ID: w11356
Authors: Daron Acemoglu; Pol Antras; Elhanan Helpman
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.
Keywords: Contracts; Technology Adoption; Productivity; International Trade
JEL Codes: D2; J2; L2; O3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Greater contractual incompleteness (D86) | Adoption of less advanced technologies (O33) |
| Adoption of less advanced technologies (O33) | Productivity differences across countries (O47) |
| Better contracting institutions (L14) | Adoption of advanced technologies (O33) |
| Adoption of advanced technologies (O33) | Enhanced productivity (O49) |
| Greater contractual incompleteness (D86) | Greater impact on technology adoption in sectors with more complementary intermediate inputs (O14) |