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Contract Enforcement in the Early Transition to a Market Economy

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Author Info
Jeffrey B. Miller () (Department of Economics,University of Delaware)
Kenneth Koford

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Abstract

How were contracts among firms enforced in the early phase of a transition economy when firms lacked experience with commercial contracts or legal procedures? What were their views of their new business environment? We interviewed a sample of Bulgarian firms, including private, state-owned and cooperative firms in 1994. Consistent with Williamson’s (1994) theories, complex contracts were quite limited, sometimes implying the breakdown of important markets, but we also found that even spot-market contracts had severe problems of bilateral dependency. Having been "burned" in previous transactions, firms were very cautious in dealing with new potential trading partners and tried to work closely with trustworthy counterparts. These results are consistent with Klein, Crawford and Alchian’s (1978) theory.

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File URL: http://www.lerner.udel.edu/economics/WorkingPapers/2005/UDWP2005-11.pdf
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Publisher Info
Paper provided by University of Delaware, Department of Economics in its series Working Papers with number 05-11.

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Length: 55 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:dlw:wpaper:05-11

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Postal: Purnell Hall, Newark, Delaware 19716
Fax: (302) 831-6968
Web page: http://www.lerner.udel.edu/departments/economics/
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Related research
Keywords: Bulgaria; contract enforcement; contract institutions; contract law; legal institutions;

Find related papers by JEL classification:
P5 - Economic Systems - - Comparative Economic Systems
P48 - Economic Systems - - Other Economic Systems - - - Other Economic Systems: Political Economy; Legal Institutions; Property Rights
I22 - Health, Education, and Welfare - - Education - - - Educational Finance
K12 - Law and Economics - - Basic Areas of Law - - - Contract Law

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References listed on IDEAS
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 & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law & Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
  2. 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.
  3. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-58, December. [Downloadable!] (restricted)
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  4. Gray, C.W., 1993. "Evolving Legal Frameworks for Private Sector Development in Central and Eastern Europe," World Bank - Discussion Papers 209, World Bank.
  5. Blanchard, O & Kremer, M, 1996. "Disorganization," Working papers 96-30, Massachusetts Institute of Technology (MIT), Department of Economics.
    Other versions:
  6. 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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  7. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December. [Downloadable!] (restricted)
    Other versions:
  8. Simon Johnson & John McMillan & Christopher Woodruff, 2000. "Entrepreneurs and the Ordering of Institutional Reform: Poland, Slovakia, Romania, Russia and Ukraine Compared," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(1), pages 1-36, March. [Downloadable!] (restricted)
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Cited by:
(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. Jeffrey B. Miller & Stoyan Tenev, 2005. "State and Ownership Reforms in Transition Economics: China vs. the Orthodoxy," Working Papers 05-10, University of Delaware, Department of Economics. [Downloadable!]
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