American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Contracts and Technology Adoption
American Economic Review
vol. 97,
no. 3, June 2007
(pp. 916–943)
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. (JEL D86, O33)Citation
Acemoglu, Daron, Pol Antràs, and Elhanan Helpman. 2007. "Contracts and Technology Adoption." American Economic Review, 97 (3): 916–943. DOI: 10.1257/aer.97.3.916JEL Classification
- D86 Economics of Contract: Theory
- O33 Technological Change: Choices and Consequences; Diffusion Processes