A Survey on Contract Theory and its Recent Empirical Developments

Abstract

This paper is a survey on the recent developments in contract theory and reviews the main bulk of the literature on static and dynamic complete bilateral contracts, as well as implicit relational contracts, while focusing mainly on the empirical work conducted on testing the predictions made by the theory. A lack of data has had hindered the ignition of empirical work for many years. However, since the eighties, more and more empirical studies have surfaced in academic journals, and through time they have been able to account for much of the econometric limitations and endogeneity concerns in recent studies.