The Transition from Relational to Legal Contract Enforcement
AbstractThis 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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Bibliographic InfoPaper provided by Singapore Management University, School of Economics in its series Working Papers with number 23-2006.
Length: 30 pages
Date of creation: Jun 2006
Date of revision:
Publication status: Published in SMU Economics and Statistics Working Paper Series
Other versions of this item:
- Fali Huang, 2006. "The Transition from Relational to Legal Contract Enforcement," Development Economics Working Papers 22441, East Asian Bureau of Economic Research.
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-11-18 (All new papers)
- NEP-DEV-2006-11-18 (Development)
- NEP-LAW-2006-11-18 (Law & Economics)
- NEP-SEA-2006-11-18 (South East Asia)
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