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Enforcement of nineteenth century banking contracts using a marriage rule

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  • Nair, Malavika

Abstract

The enforcement of financial and banking contracts is commonly thought to lie within the domain of government law provision. This paper analyzes a case of self-enforcing financial contracts within a banking system in nineteenth century South India. The Chettiars, a merchant-banking caste, relied on religious homogeneity as well as an endogamous marriage rule, whereby members only married others from within the community, to enforce banking contracts within their system. Widely acknowledged to have been an important source of credit locally and throughout South East Asia, this paper describes and analyzes the enforcement mechanisms at work, in the absence of government involvement. Apart from presenting a new case of self-enforced financial contracts, this paper also represents a novel approach to interpreting the social institution of caste, as seen through the rational choice framework.

Suggested Citation

  • Nair, Malavika, 2011. "Enforcement of nineteenth century banking contracts using a marriage rule," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(4), pages 360-367.
  • Handle: RePEc:eee:quaeco:v:51:y:2011:i:4:p:360-367
    DOI: 10.1016/j.qref.2011.08.001
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    References listed on IDEAS

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    More about this item

    Keywords

    Self-enforcement; Financial contracts; Endogamy; Caste;

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East

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