|
on Contract Theory and Applications |
| By: | Laura Alfaro; Pol Antras; Davin Chor; Paola Conconi |
| Abstract: | In recent decades, technological progress in information and communication technology andfalling trade barriers have led firms to retain within their boundaries and in their domesticeconomies only a subset of their production stages. A key decision facing firms worldwide is theextent of control to exert over the di↵erent segments of their production processes. Building onAntr`as and Chor (2013), we describe a property-rights model of firm boundary choices alongthe value chain. To assess the evidence, we construct firm-level measures of the upstreamness ofintegrated and non-integrated inputs by combining information on the production activities offirms operating in more than 100 countries with Input-Output tables. In line with the model’spredictions, we find that whether a firm integrates upstream or downstream suppliers dependscrucially on the elasticity of demand for its final product. Moreover, a firm’s propensity tointegrate a given stage of the value chain is shaped by the relative contractibility of the stageslocated upstream versus downstream from that stage. Our results suggests that contractualfrictions play an important role in shaping the integration choices of firms around the world. |
| Keywords: | global value chains; sequential production; incomplete contracts |
| JEL: | F14 F23 D23 L20 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2013/216728&r=cta |
| By: | Olena Ivus (Queen's University); Walter Park (American University); Kamal Saggi (Vanderbilt University) |
| Abstract: | Using data on U.S. firms' technology licensing to local agents in developing countries, this paper examines the impact of patent protection on internal and arms-length technology transfer. The effects of protection vary across products according to their complexity. Consistent with theories of internalization, we find that patent reforms enable local firms to attract more arms-length technology transfer, especially of simple products which are relatively easy to imitate. Affiliated licensing also rises among simple products, but falls among complex products. The results withstand several robustness checks, including controlling for endogeneity by using colonial origin as an instrument, and are equally strong whether patent protection is measured by its intensity or by the timing of reforms. The results have significance for patent policy in the developing world, where access to knowledge is critical. Through arms-length technology contracts, proprietary knowledge diffuses beyond firm boundaries, enabling local agents to access not only the protected technology but also know-how. |
| Keywords: | International Technology Transfer, Licensing, Developing Countries, Product Complexity, Intellectual Property Rights, and Imitation Risk |
| JEL: | O3 F2 |
| Date: | 2015–12–02 |
| URL: | http://d.repec.org/n?u=RePEc:van:wpaper:vuecon-sub-15-00016&r=cta |
| By: | Lambie-Hanson, Lauren (Federal Reserve Bank of Philadelphia); Lambie-Hanson, Timothy (Haverford College) |
| Abstract: | In many U.S. states, the law firms that represent lenders in foreclosure proceedings must hire auctioneers to carry out the foreclosure auctions. The authors empirically test whether processing times differ for law firms that integrate the mortgage foreclosure auction process compared with law firms that contract with independent auction companies. They find that independent firms are able to initially schedule auctions more quickly, but when postponements occur, they are no faster to adapt. Since firms schedule the initial auction before contracting, independent auction companies have an incentive to conform to the law firms’ schedules in order to secure the contracts. The authors argue that this is evidence of a cost of integration stemming from poorly aligned incentives within the firm. |
| Keywords: | Vertical integration; Mortgage foreclosure |
| JEL: | D23 G21 G28 L22 L85 |
| Date: | 2015–10–17 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:15-38&r=cta |
| By: | Deborah Goldschmidt (Boston University); Johannes Schmieder (Boston University) |
| Abstract: | The nature of the relationship between employers and employees has been changing over the last three decades, with firms increasingly relying on contractors, temp agencies, and franchises rather than hiring employees directly. We investigate the impact of this transformation on the wage structure by following jobs that are moved outside of the boundary of lead employers to contracting firms. For this end we develop a new method for identifying outsourcing of food, cleaning, security, and logistics services in administrative data using the universe of social security records in Germany. We document a dramatic growth of domestic outsourcing in Germany since the early 1990s. Event-study analyses show that wages in outsourced jobs fall by approximately 10–15% relative to similar jobs that are not out-sourced. We find evidence that the wage losses associated with outsourcing stem from a loss of firm-specific rents, suggesting that labor cost savings are an important reason why firms choose to contract out these services. Finally, we tie the increase in outsourcing activity to broader changes in the German wage structure, in particular, showing that outsourcing of cleaning, security, and logistics services alone accounts for around 9 percent of the increase in German wage inequality since the 1980s. |
| Keywords: | outsourcing, wages, nonstandard work arrangements, wage inequality, firm rents, IEB data |
| JEL: | J31 J23 L24 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:upj:weupjo:15-244&r=cta |
| By: | Battaglini, Marco; Lamba, Rohit |
| Abstract: | We study a dynamic principal-agent model in which the agent's types are serially correlated. In these models, the standard approach consists of first solving a relaxed version in which only local incentive compatibility constraints are considered, and then in proving that the local constraints are sufficient for implementability. We explore the conditions under which this approach is valid and can be used to characterize the profit maximizing contract. We show that the approach works when the optimal allocation in the relaxed problem is monotonic in the types, a condition that is satisfied in most solved examples. Contrary to the static model, however, monotonicity is generally violated in many interesting economic environments. Moreover, when the time horizon is long enough and serial correlation is sufficiently high, global incentive compatibility constraints are generically binding. By fully characterizing a simple two period example, we uncover a number of interesting features of the optimal contract that cannot be observed in spatial environments in which the standard approach works. Finally, we show that even in complex environments, approximately optimal allocations can be easily characterized by focusing on a particular class of contracts in which the allocation is forced to be monotonic. |
| Keywords: | contract theory; dynamic contracts |
| JEL: | D86 |
| Date: | 2015–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10956&r=cta |