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Courts And Contract Enforcement In Transition Agriculture: Theory And Evidence From Poland

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Author Info
Beckmann, Volker
Boger, Silke

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Abstract

The paper investigates theoretically and empirically the role of courts for contract enforcement in transition agriculture. In a survey of 306 Polish hog farmers conducted in 1999, only 38.5% of them reported to believe that they could use courts to enforce contracts with their most important customer. Furthermore, those who believe the legal system could be used would accept significant financial losses before taking action. We develop a theoretical model, based on the costs and benefits of court enforcement, which captures the boundary between contracts to be regarded as "enforceable" and "not-enforceable" and, simultaneously, the threshold of taking legal action. The empirical analysis strongly supports our model: (1) the farmers' responds can be explained by cost-benefit calculations regarding the use of courts, (2) the legal "enforceability" of contracts depends on not only the efficiency of the legal system, but also on the attributes of the transaction, the contracts and the relationship between buyer and seller, and (3) the threshold of taking legal action is significantly influenced by indirect costs of court enforcement, such as the disruption of a valuable relationship, and by the availability of alternative enforcement mechanisms.

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Paper provided by International Association of Agricultural Economists in its series 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa with number 25878.

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Date of creation: 2003
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Handle: RePEc:ags:iaae03:25878

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Keywords: Agricultural contracts; contract enforcement; courts; transition; Political Economy;

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Klein, Benjamin, 1996. "Why Hold-Ups Occur: The Self-Enforcing Range of Contractual Relationships," Economic Inquiry, Oxford University Press, vol. 34(3), pages 444-63, July.
  2. Kandori, Michihiro, 1992. "Social Norms and Community Enforcement," Review of Economic Studies, Blackwell Publishing, vol. 59(1), pages 63-80, January. [Downloadable!] (restricted)
  3. Kali, Raja, 1999. "Endogenous Business Networks," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(3), pages 615-36, October.
  4. Kathryn Hendley & Peter Murrell & Randi Ryterman, 1998. "Law, Relationships, and Private Enforcement: Transactional Strategies of Russian Enterprises," Electronic Working Papers 98-001, University of Maryland, Department of Economics. [Downloadable!]
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  5. Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, vol. 83(3), pages 525-48, June. [Downloadable!] (restricted)
  6. John McMillan & Christopher Woodruff, 1999. "Interfirm Relationships And Informal Credit In Vietnam," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1285-1320, November. [Downloadable!] (restricted)
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  7. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-41, August. [Downloadable!] (restricted)
  8. Simon Johnson & John McMillan, 2002. "Courts and Relational Contracts," Journal of Law, Economics and Organization, Oxford University Press, vol. 18(1), pages 221-277, April.
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  9. Fafchamps, Marcel, 1996. "The enforcement of commercial contracts in Ghana," World Development, Elsevier, vol. 24(3), pages 427-448, March. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bardos, Krisztina & Ferto, Imre, 2006. "The Contract Choice of Retailers in Hungarian Beef Sector," 99th Seminar, February 8-10, 2006, Bonn, Germany 7746, European Association of Agricultural Economists. [Downloadable!]
  2. Swinnen, Johan F.M. & Vandeplas, Anneleen, 2007. "From Public to Private Governance of Agri-food Supply Chains in Transition Countries: Some Theoretical and Empirical Lessons," 104th Seminar, September 5-8, 2007, Budapest, Hungary 8521, European Association of Agricultural Economists. [Downloadable!]
  3. Yu, Xiaohua & Abler, David & Peng, Chao, 2008. "Dancing with the Dragon Heads: Enforcement, Innovations and Efficiency of Contracts between Agricultural Processors and Farmers in China," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6144, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
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