Contracting in the Shadow of a Corrupt Court
Abstract
This paper presents an incomplete contracting model to show how judicial corruption and judicial favoritism can lead to distortions in agents' incentives to invest in relation-specific assets and cause inefficiency. I also show that while an increase in the judge's income always increases investment, it is possible that a strongly favoritism-reducing increase in the authority's propensity to monitor the judiciary can actually reduce, instead of increase, investment in equilibrium. The implications of these findings for the study of institutional reforms, the relationship between the institutional environment and institutional arrangements, and the political economy of connections are explored.Download Info
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Bibliographic Info
Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.
Volume (Year): 155 (1999)
Issue (Month): 2 (June)
Pages: 249-
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Related research
Keywords:Other versions of this item:
- Mui, V.L., 1995. "Contracting in the Shadows of a Corrupt Court," Papers 9507, Southern California - Department of Economics.
- D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Cooter, Robert & Garoupa, Nuno, 2000. "The Virtuous Circle of Distrust: A Mechanism to Deter Bribes and Other Cooperative Crimes," Berkeley Olin Program in Law & Economics, Working Paper Series qt83c0k3wc, Berkeley Olin Program in Law & Economics.
- Juin-jen Chang & Chia-ying Liu, 2007. "The Negligence Rule in the Presence of Judicial Corruption and Social Norms," Atlantic Economic Journal, International Atlantic Economic Society, vol. 35(2), pages 203-215, June.
- Ari Van Assche & Galina A. Schwartz, 2013. "Contracting Institutions and Ownership Structure in International Joint Ventures," CIRANO Working Papers 2013s-04, CIRANO.
- Kretschmer, Anne, 2002. "Maßnahmen zur Kontrolle von Korruption: Eine modelltheoretische Untersuchung," Arbeitspapiere 25, Westfälsche Wilhelms-Universität Münster (WWU), Institut für Genossenschaftswesen.
- Peter Bardsley & Quan Nguyen, 2005. "Rent Seeking and Judicial Bias in Weak Legal Systems," Department of Economics - Working Papers Series 925, The University of Melbourne.
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