EconPapers    
Economics at your fingertips  
 

Contractual Institutions, Financial Development and Vertical Integration: Theory and Evidence

Rocco Macchiavello ()

No 392, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: This paper presents an industry equilibrium model of vertical integration under contractual imperfections with specific input suppliers and external investors. I assume that vertical integration economizes on the needs for contracts with specific input suppliers at the cost of higher fixed costs. I show that contractual frictions with external investors affect vertical integration through two opposing channels whose relative intensities depend on other determinants of firms size distribution in the industry. Using cross-country-industry data, I present novel evidence on the institutional determinants of international differences in vertical integration which is consistent with the predictions of the theoretical model. In particular, I show that countries with more developed financial systems are relatively more vertically integrated in industries that employ a high share of workers in large firms.

Keywords: Vertical Integration; Credit Constraints; Contract Enforcement; Developing Countries; Industry; Equilibrium (search for similar items in EconPapers)
JEL-codes: D23 L11 L22 O14 (search for similar items in EconPapers)
Date: 2008-04-01
New Economics Papers: this item is included in nep-bec and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.economics.ox.ac.uk/materials/working_papers/paper392.pdf (application/pdf)

Related works:
Working Paper: Contractual Institutions, Financial Development and Vertical Integration: Theory and Evidence (2006) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oxf:wpaper:392

Access Statistics for this paper

More papers in Economics Series Working Papers from University of Oxford, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Anne Pouliquen ( this e-mail address is bad, please contact ).

 
Page updated 2020-09-21
Handle: RePEc:oxf:wpaper:392