A striking feature of the structural change literature is that, even though the U.S. economy is often used as a benchmark for calibration, the traditional models cannot account for the steep decline in manufacturing and rise in services in the United States since the late 1970s (Buera et al.,...

A key feature of economic growth is the inevitable structural change across sectors: the agriculture sector shrinks, the service sector rises, and the manufacturing sector performs a hump-shaped pattern. In addition, empirical observations reveal that the historical investment rates in today's...

Several recent papers argue that contracts provide reference points that affect ex post behavior. We test this hypothesis in a canonical buyer-seller relationship with renegotiation. Our paper provides causal experimental evidence that an initial contract has a highly significant and...

We present an international trade model with multiproduct firms. Firms are heterogeneously endowed with two types of capabilities that jointly determine the trade-off within firms between managing a large portfolio of products and producing at low marginal cost. The model can explain many of the...

This paper reports data from a laboratory experiment on two-period moral hazard problems. The findings corroborate the contract-theoretic insight that even though the periods are technologically unrelated, due to incentive considerations principals can benefit from offering long-term contracts...

We study a continuous-time game of strategic experimentation in which the players try to assess the failure rate of some new equipment or technology. Breakdowns occur at the jump times of a Poisson process whose unknown intensity is either high or low. In marked contrast to existing models, we...