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Risk, Incentives, and Contracts: Partnerships in Rio de Janeiro, 1870–1891

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  • Abramitzky, Ran
  • Frank, Zephyr
  • Mahajan, Aprajit

Abstract

We construct an individual-level data set of partnership contracts in late-nineteenth-century Rio de Janeiro to study the determinants of contract terms. Partners with limited liability contributed more capital and received lower draws for private expenses and lower profit shares than their unlimited partners. Unlimited partners in turn received higher-powered incentives when they contracted with limited partners than when they contracted with unlimited partners. A reform that changed the relative bargaining power further improved the terms of unlimited partners in limited firms. These findings highlight the roles of risk, incentives, and bargaining power in shaping contracts.

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  • Abramitzky, Ran & Frank, Zephyr & Mahajan, Aprajit, 2010. "Risk, Incentives, and Contracts: Partnerships in Rio de Janeiro, 1870–1891," The Journal of Economic History, Cambridge University Press, vol. 70(3), pages 686-715, September.
    • Handle: RePEc:cup:jechis:v:70:y:2010:i:03:p:686-715_00
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    Cited by:

    1. Guinnane, Timothy W. & Schneebacher, Jakob, 2020. "Enterprise form: Theory and history," Explorations in Economic History, Elsevier, vol. 76(C).
    2. Guinnane, Timothy W. & Marrinez Rodriguez, Susana, 2012. "For Every Law, a Loophole: Flexibility in the Menu of Spanish Business Forms, 1886-1936," Center Discussion Papers 123319, Yale University, Economic Growth Center.
    3. Timothy Guinnane & Jakob Schneebacher, 2018. "Capital Structure and the Choice of Enterprise Form: theory and history," Working Papers 1061, Economic Growth Center, Yale University.

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