The "Fundamental Transformation" in Macroeconomics / Ricardo J. Caballero, Mohamad L. Hammour.

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Caballero, Ricardo J

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w5471.Publication details: Cambridge, Mass. National Bureau of Economic Research 1996.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: When factors enter into joint-production, they typically develop a degree of specificity with respect to each other. It is well known that, when combined with contracting difficulties, specificity gives rise to a Williamsonian 'Fundamental Transformation' from an ex-ante competitive relationship to an ex-post bilateral monopoly. The macroeconomic consequences of widespread specificity are far-reaching. Specificity results in misallocation, underutilization, and unemployment of the economy's productive factors; it hampers growth by depressing the incentives to replace what is outdated and to fully utilize the economy's resources; it disrupts macroeconomic adjustment by inducing a wedge between timid creation and excessive destruction of the old system; and it exacerbates downturns by `elastifying' the cyclical response of inelastic factors.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w5471 (Browse shelf(Opens below))	Not For Loan

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February 1996.

When factors enter into joint-production, they typically develop a degree of specificity with respect to each other. It is well known that, when combined with contracting difficulties, specificity gives rise to a Williamsonian 'Fundamental Transformation' from an ex-ante competitive relationship to an ex-post bilateral monopoly. The macroeconomic consequences of widespread specificity are far-reaching. Specificity results in misallocation, underutilization, and unemployment of the economy's productive factors; it hampers growth by depressing the incentives to replace what is outdated and to fully utilize the economy's resources; it disrupts macroeconomic adjustment by inducing a wedge between timid creation and excessive destruction of the old system; and it exacerbates downturns by `elastifying' the cyclical response of inelastic factors.