Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/177191 
Year of Publication: 
2018
Series/Report no.: 
IZA Discussion Papers No. 11387
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
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.
Subjects: 
time preferences
relational contracting
aggregate welfare
TFP
JEL: 
D23
L14
L22
L23
O10
Document Type: 
Working Paper

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