Time Is on My Side: Relational Contracts and Aggregate Welfare
Bohdan Kukharskyy () and
Michael P. Pflüger ()
Additional contact information
Bohdan Kukharskyy: University of Passau
Michael P. Pflüger: University of Würzburg
No 11387, IZA Discussion Papers from Institute for the Study of Labor (IZA)
This paper develops a simple general equilibrium model which establishes a link between the patience of economic agents and the well-being of nations. We show that firms in long-term oriented countries can mitigate hold-up inefficiencies by engaging with their suppliers in relational contracting – informal agreements sustained by the value of future relationships. Our model predicts that countries with a higher level of patience will exhibit greater economic well-being and higher total factor productivity. We provide empirical evidence in line with the predictions of our theory.
Keywords: time preferences; relational contracting; aggregate welfare; TFP (search for similar items in EconPapers)
JEL-codes: D23 L14 L22 L23 O10 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp11387
Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Access Statistics for this paper
More papers in IZA Discussion Papers from Institute for the Study of Labor (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Mark Fallak ().