THE MACROECONOMICS OF SPECIFICITY

Specific quasi rents arise in a variety of economic relationships and are exposed to opportunism unless fully protected by contract. Rent ap propriation has important macroeconomic consequences. Resources are un derutilized, factor markets are segmented, production suffers from tec hnological ''sclerosis,'' job creation and destruction are unbalanced, recessions are excessively sharp, and expansions run into bottlenecks . While, depending on the shock, expansions may require reinforcement or stabilization, recessions should typically be softened. In the long run, institutions may evolve to alleviate the problem by balancing ap propriation. Technology choice will also be affected, with the appropr iated factor partially ''excluding'' the other from production to redu ce appropriation.