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Uncertainty, investment and productivity with relational contracts

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  • James Malcomson

Abstract

This paper shows that, in the presence of relational contracts, an increase in uncertainty with no change in factor prices reduces capital investment and productivity in the long run even if the parties are otherwise risk neutral.

Suggested Citation

  • James Malcomson, 2021. "Uncertainty, investment and productivity with relational contracts," Economics Series Working Papers 940 JEL classification: C, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:940
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    File URL: https://ora.ox.ac.uk/objects/uuid:47c05914-ddeb-4d83-b08b-393916ede627
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    References listed on IDEAS

    as
    1. Matthias Fahn & Valeria Merlo & Georg Wamser, 2017. "Relational Contracts, the Cost of Enforcing Formal Contracts, and Capital Structure Choice - Theory and Evidence," CESifo Working Paper Series 6562, CESifo.
    2. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-641, August.
    3. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    4. Jean-Jacques Laffont, 1989. "The Economics of Uncertainty and Information," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121360, April.
    5. Gary S. Becker, 1975. "Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education, Second Edition," NBER Books, National Bureau of Economic Research, Inc, number beck75-1.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Francesc Dilmé & Daniel F. Garrett, 2023. "Relational Contracts: Public versus Private Savings," Econometrica, Econometric Society, vol. 91(3), pages 1025-1075, May.
    2. W. Bentley MacLeod & James M. Malcomson, 2023. "Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment: Thirty Years On," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 179(3-4), pages 470-499.

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    More about this item

    Keywords

    General capital; specific capital; investment; relational contracts; risk;
    All these keywords.

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