Growth, selection and appropriate contracts
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- dc.contributor.author Bonfiglioli, Alessandraca
- dc.contributor.author Gancia, Gino A.ca
- dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
- dc.date.accessioned 2017-07-26T12:07:58Z
- dc.date.available 2017-07-26T12:07:58Z
- dc.date.issued 2009-07-01
- dc.date.modified 2017-07-23T02:14:57Z
- dc.description.abstract We study a dynamic model where growth requires both long-term investment and the selection of talented managers. When ability is not ex-ante observable and contracts are incomplete, managerial selection imposes a cost, as managers facing the risk of being replaced choose a sub-optimally low level of long-term investment. This generates a trade-off between selection and investment that has implications for the choice of contractual relationships and institutions. Our analysis shows that rigid long-term contracts sacrificing managerial selection may prevail at early stages of economic development and when heterogeneity in ability is low. As the economy grows, however, knowledge accumulation increases the return to talent and makes it optimal to adopt flexible contractual relationships, where managerial selection is implemented even at the cost of lower investment. Measures of investor protection aimed at limiting the bargaining power of managers improve selection under short-term contract. Given that knowledge accumulation raises the value of selection, the optimal level of investor protection increases with development.
- dc.format.mimetype application/pdfca
- dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1345
- dc.identifier.citation Review of Economic Dynamics, 17 (1), 21-38, 2014
- dc.identifier.uri http://hdl.handle.net/10230/19924
- dc.language.iso eng
- dc.relation.ispartofseries Economics and Business Working Papers Series; 1345
- dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
- dc.rights.accessRights info:eu-repo/semantics/openAccess
- dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
- dc.subject.keyword information
- dc.subject.keyword selection
- dc.subject.keyword appropriate contracts
- dc.subject.keyword development
- dc.subject.keyword growth
- dc.subject.keyword appropriate institutions
- dc.subject.keyword investor protection
- dc.subject.keyword Macroeconomics and International Economics
- dc.title Growth, selection and appropriate contractsca
- dc.type info:eu-repo/semantics/workingPaper