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The Transition from Relational to Legal Contract Enforcement

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Author Info
Fali Huang () (School of Economics and Social Sciences, Singapore Management University)

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Abstract

This paper studies the transition of contract enforcement institutions. The preva- lence of relational contracts, low legal quality, strong cultural preference for personalistic relationships, low social mobility, and highly unequal endowment form a cluster of mutually reinforcing institutions that hinder economic development. The cultural element per se does not necessarily reduce social welfare though it may slow down the legal development, while the real problem lies in endowment inequality and low social mobility. Thus a more equal distribution of resources may be the ultimate key to unravel the above interlocking institutions. These results are generally consistent with the empirical evidence.

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Publisher Info
Paper provided by Singapore Management University, School of Economics in its series Working Papers with number 23-2006.

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Length: 30 pages
Date of creation: Jun 2006
Date of revision:
Publication status: Published in SMU Economics and Statistics Working Paper Series
Handle: RePEc:siu:wpaper:23-2006

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Related research
Keywords: relational contract; legal contract enforcement; institutions; endowment inequality; economic development;

Find related papers by JEL classification:
O1 - Economic Development, Technological Change, and Growth - - Economic Development
K49 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Other
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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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.:
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    Other versions:
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    Other versions:
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    Other versions:
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    Other versions:
    • Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Juan Botero, 2003. "The Regulation of Labor," NBER Working Papers 9756, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. John Shuhe Li, 2003. "Relation-based versus Rule-based Governance: an Explanation of the East Asian Miracle and Asian Crisis," Review of International Economics, Blackwell Publishing, vol. 11(4), pages 651-673, 09. [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. Jelena Pavlovic & Joshua Charap, 2009. "Development of the Commercial Banking System in Afghanistan: Risks and Rewards," IMF Working Papers 09/150, International Monetary Fund. [Downloadable!]
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