Time is on my side: relational contracts and aggregate welfare
"This paper develops a simple general equilibrium model which establishes a link between the patience of economic agents and the well-being of nations. We show that firms in long-term oriented countries can mitigate hold-up inefficiencies by engaging with their suppliers in relational contracti...
| Main Authors: | , |
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| Institution: | ETUI-European Trade Union Institute |
| Format: | TEXT |
| Language: | English |
| Published: |
Bonn
2018
IZA |
| Subjects: | |
| Online Access: | https://www.labourline.org/KENTIKA-19399936124911171189-Time-is-on-my-side-relational-.htm |
| Summary: | "This paper develops a simple general equilibrium model which establishes a link between the patience of economic agents and the well-being of nations. We show that firms in long-term oriented countries can mitigate hold-up inefficiencies by engaging with their suppliers in relational contracting – informal agreements sustained by the value of future relationships. Our model predicts that countries with a higher level of patience will exhibit greater economic well-being and higher total factor productivity. We provide empirical evidence in line with the predictions of our theory." |
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| Physical Description: | 27 p. Digital |