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Legal institutions affect economic outcomes, but how much? This paper documents how costly supplier contract enforcement shapes firm boundaries, and quantifies the impact of this transaction cost on aggregate productivity and welfare. I embed a contracting game between a buyer and a supplier in...
Persistent link: https://www.econbiz.de/10010945625
We develop a framework that uses micro data to estimate the aggregate capital-labor elasticity of substitution. We first show that the aggregate elasticity is a convex combination of the plant-level elasticity of substitution and the elasticity of demand. This expression captures substitution...
Persistent link: https://www.econbiz.de/10011183572
This paper studies an environment in which the network structure of production - who buys inputs from whom - is determined endogenously and is the key determinant of aggregate productivity. I address two questions: How do contracting frictions shape the equilibrium network structure? And...
Persistent link: https://www.econbiz.de/10011188046