Does trade foster contract enforcement?

Description

"Contract enforcement is probabilistic, but the probability depends on rules and processes. A stimulus to trade may induce traders to alter rules or processes to improve enforcement. In the model of this paper, such a positive knock-on effect occurs when the elasticity of supply of traders is sufficiently high. Negative knock-on is possible when the elasticity is low. Enforcement strategies in competing markets are complements (substitutes) if the supply of traders is sufficiently elastic (inelastic). The model provides a useful structure of endogenous enforcement that gives promise of explaining patterns of institutional development"--National Bureau of Economic Research web site.

Subjects

Series Statement

• NBER working paper series -- working paper 14045
• Working paper series (National Bureau of Economic Research : Online) -- working paper no. 14045.

Links

• http://papers.nber.org/papers/w14045
• URL