In this paper we analyze the impact of government and private ownership of banks on firms’ probability to innovate. We estimate firms’ decision to innovate and their selection of a main lender for a sample of 9000 German manufacturing companies. Since these two decisions may be...

This paper discusses the design of appropriate institutions for trade policy-making in Central and Eastern Europe. Drawing on US and EU experience it argues that legislatures should set the broad parameters, leaving commodity-specific detail to the executives. Sectoral Ministries, e.g. of...

Do contractual frictions matter when firms are engaged in repeated interactions? This paper argues that long-term relationships, which allow firms to (partly) overcome the static costs associated with low contractibility, will under certain circumstances create dynamic inefficiencies. We...

This paper analyzes the financing terms that support international trade and sheds light on how and why these arrangements affect trade. Using detailed transaction level data from a U.S. based exporter of frozen and refrigerated food products, primarily poultry, it begins by describing broad...

We study cartel contracts using data on 18 contract clauses of 109 legal Finnish manufacturing cartels. One third of the clauses relate to raising profits; the others deal with instability through incentive compatibility, cartel organization, or external threats. Cartels use three main...

In a model where biased judges can distort contract enforcement, we uncover positive feedback effects between the use of innovative contracts and legal evolution that improve verifiability and contracting over time. We find, however, that the cost of judicial bias also grows over time because...

This paper offers an explanation of rationally incomplete contracts, where incompleteness refers to unforeseen contingencies. Agents enter a two-sided moral hazard relationship, in which a commitment to discard parts of the joint resources may be ex-ante efficient. This happens through costly...

We develop a theory of control rights in the context of licensing interim innovative knowledge for further development, which is consistent with the inalienability of initial innovator’s intellectual property rights. Control rights of a downstream development unit, a buyer of the interim...

The mix of formal and informal mechanisms for contract enforcement is examined using survey data from Russia, Ukraine, Romania, Poland, and Slovakia. Using the size of trade credit to quantify the success of contracting, we ask: Do the courts have a perceptible effect on contracting? When can a...

We provide a simple but novel model of trade agreements that highlights the role of transaction costs, renegotiation and dispute settlement. The model allows us to characterize the appropriate remedy for breach and whether the agreement should be structured as a system of "property rights" or...