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Limited Enforcement and the Organization of Production

By Erwan Quintin

Abstract

This paper describes a dynamic, general equilibrium model designed to assess whether contractual imperfections in the form of limited enforcement can account for international differences in the organization of production. In the model, limited enforcement constrains agents to operate establishments below their optimal scale. As a result, economies where contracts are enforced more efficiently tend to be richer and emphasize large scale production. Calibrated simulations of the model reveal that these effects can be large and account for a sizeable part of the observed differences in the size distribution of manufacturing establishments between the United States, Mexico and Argentina

Topics: Limited enforcement, Organization of production, Economic development. JEL classification, L23, O11. I would like to thank Hugo Hopenhayn, Pat Kehoe, Tim Kehoe, Narayana Kocherlakota
Year: 2003
OAI identifier: oai:CiteSeerX.psu:10.1.1.198.2645
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