IDEAS home Printed from https://ideas.repec.org/a/sae/jinter/v38y2026i2p233-258.html

The Choice of Contract-enforcement Institutions: A Review

Author

Listed:
  • Indervir Singh

Abstract

All public- and private-order institutions have strengths and weaknesses when it comes to the enforcement of contracts. In general, the availability of a low-cost legal system and multilateral reputation institutions is found to be more important for the long-term development of a country than bilateral reputation and private enforcement. The efficiency and cost of institutions differ considerably from place to place. The studies have observed that the cost of using private-order institutions is often lower than public-order institutions in underdeveloped economies. While the existing literature has substantially added to our understanding of contract-enforcement institutions, the issue of complementarity among these institutions has only recently received attention. Investigating this issue may considerably enhance our understanding of enforcement institutions and their economic impact. JEL: K12, K42

Suggested Citation

  • Indervir Singh, 2026. "The Choice of Contract-enforcement Institutions: A Review," Journal of Interdisciplinary Economics, , vol. 38(2), pages 233-258, July.
    • Handle: RePEc:sae:jinter:v:38:y:2026:i:2:p:233-258
    DOI: 10.1177/02601079221083477
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/02601079221083477
    Download Restriction: no
    File URL: https://libkey.io/10.1177/02601079221083477?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Ernst Fehr & Urs Fischbacher, "undated". "Third Party Punishment and Social Norms," IEW - Working Papers 106, Institute for Empirical Research in Economics - University of Zurich.
    2. Sujata Visaria, 2009. "Legal Reform and Loan Repayment: The Microeconomic Impact of Debt Recovery Tribunals in India," American Economic Journal: Applied Economics, American Economic Association, vol. 1(3), pages 59-81, July.
    3. Andrei Shleifer & Florencio Lopez-de-Silanes & Rafael La Porta, 2008. "The Economic Consequences of Legal Origins," Journal of Economic Literature, American Economic Association, vol. 46(2), pages 285-332, June.
    4. Alberto Zazzaro, 2005. "Should Courts Enforce Credit Contracts Strictly?," Economic Journal, Royal Economic Society, vol. 115(500), pages 166-184, January.
    5. Chemin, Matthieu, 2009. "Do judiciaries matter for development? Evidence from India," Journal of Comparative Economics, Elsevier, vol. 37(2), pages 230-250, June.
    6. Simeon Djankov & Oliver Hart & Caralee McLiesh & Andrei Shleifer, 2008. "Debt Enforcement around the World," Journal of Political Economy, University of Chicago Press, vol. 116(6), pages 1105-1149, December.
    7. Cooter, Robert, 1998. "Expressive Law and Economics," The Journal of Legal Studies, University of Chicago Press, vol. 27(2), pages 585-608, June.
    8. Rocco Macchiavello & Ameet Morjaria, 2015. "The Value of Relationships: Evidence from a Supply Shock to Kenyan Rose Exports," American Economic Review, American Economic Association, vol. 105(9), pages 2911-2945, September.
    9. La Porta, Rafael, et al, 1997. "Trust in Large Organizations," American Economic Review, American Economic Association, vol. 87(2), pages 333-338, May.
    10. 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 525-548, June.
    11. Stephen Knack & Philip Keefer, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1251-1288.
    12. Woodruff, Christopher, 1998. "Contract enforcement and trade liberalization in Mexico's footwear industry," World Development, Elsevier, vol. 26(6), pages 979-991, June.
    13. W. Bentley MacLeod, 2007. "Reputations, Relationships, and Contract Enforcement," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 595-628, September.
    14. Djankov, Simeon & McLiesh, Caralee & Shleifer, Andrei, 2007. "Private credit in 129 countries," Journal of Financial Economics, Elsevier, vol. 84(2), pages 299-329, May.
    15. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
    16. Greif, Avner, 1989. "Reputation and Coalitions in Medieval Trade: Evidence on the Maghribi Traders," The Journal of Economic History, Cambridge University Press, vol. 49(4), pages 857-882, December.
    17. Steven Shavell, 1980. "Damage Measures for Breach of Contract," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 466-490, Autumn.
    18. Luc Laeven & Christopher Woodruff, 2007. "The Quality of the Legal System, Firm Ownership, and Firm Size," The Review of Economics and Statistics, MIT Press, vol. 89(4), pages 601-614, November.
    19. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-586, June.
    20. George A. Akerlof, 1980. "A Theory of Social Custom, of which Unemployment may be One Consequence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(4), pages 749-775.
    21. Gow, Hamish R. & Streeter, Deborah H. & Swinnen, Johan F. M., 2000. "How private contract enforcement mechanisms can succeed where public institutions fail: the case of Juhocukor a.s," Agricultural Economics, Blackwell, vol. 23(3), pages 253-265, September.
    22. Aleem, Irfan, 1990. "Imperfect Information, Screening, and the Costs of Informal Lending: A Study of a Rural Credit Market in Pakistan," The World Bank Economic Review, World Bank, vol. 4(3), pages 329-349, September.
    23. Telser, L G, 1980. "A Theory of Self-enforcing Agreements," The Journal of Business, University of Chicago Press, vol. 53(1), pages 27-44, January.
    24. Hay, Jonathan R & Shleifer, Andrei, 1998. "Private Enforcement of Public Laws: A Theory of Legal Reform," American Economic Review, American Economic Association, vol. 88(2), pages 398-403, May.
    25. Alberto Alesina & Paola Giuliano, 2015. "Culture and Institutions," Journal of Economic Literature, American Economic Association, vol. 53(4), pages 898-944, December.
    26. Scully, Gerald W, 1988. "The Institutional Framework and Economic Development," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 652-662, June.
    27. Levine, Ross, 1998. "The Legal Environment, Banks, and Long-Run Economic Growth," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(3), pages 596-613, August.
    28. Fafchamps, Marcel, 1996. "The enforcement of commercial contracts in Ghana," World Development, Elsevier, vol. 24(3), pages 427-448, March.
    29. Fabbri, Daniela & Padula, Mario, 2004. "Does poor legal enforcement make households credit-constrained?," Journal of Banking & Finance, Elsevier, vol. 28(10), pages 2369-2397, October.
    30. Elster, Jon, 1989. "Social Norms and Economic Theory," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 99-117, Fall.
    31. Kali, Raja, 1999. "Endogenous Business Networks," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(3), pages 615-636, October.
    32. Silvia Magri, 2007. "Italian households’ debt: the participation to the debt market and the size of the loan," Empirical Economics, Springer, vol. 33(3), pages 401-426, November.
    33. Kornhauser, Lewis A, 1983. "Reliance, Reputation, and Breach of Contract," Journal of Law and Economics, University of Chicago Press, vol. 26(3), pages 691-706, October.
    34. Basu, Kaushik, 2003. "Prelude to Political Economy: A Study of the Social and Political Foundations of Economics," OUP Catalogue, Oxford University Press, number 9780199261857.
    35. George Akerlof, 1976. "The Economics of Caste and of the Rat Race and Other Woeful Tales," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(4), pages 599-617.
    36. Michihiro Kandori, 1992. "Social Norms and Community Enforcement," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(1), pages 63-80.
    37. Banner, Stuart, 1998. "The Origin of the New York Stock Exchange, 1791-1860," The Journal of Legal Studies, University of Chicago Press, vol. 27(1), pages 113-140, January.
    38. Bodoh-Creed, Aaron L., 2019. "Endogenous institutional selection, building trust, and economic growth," Games and Economic Behavior, Elsevier, vol. 114(C), pages 169-176.
    39. Azeta Cungu & Hamish Gow & Johan F. M. Swinnen & Liesbet Vranken, 2008. "Investment with weak contract enforcement: evidence from Hungary during transition," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 35(1), pages 75-91, March.
    40. Joyee Deb, 2020. "Cooperation and Community Responsibility," Journal of Political Economy, University of Chicago Press, vol. 128(5), pages 1976-2009.
    41. Bernstein, Lisa, 1992. "Opting Out of the Legal System: Extralegal Contractual Relations in the Diamond Industry," The Journal of Legal Studies, University of Chicago Press, vol. 21(1), pages 115-157, January.
    42. Biggs, Tyler & Raturi, Mayank & Srivastava, Pradeep, 2002. "Ethnic networks and access to credit: evidence from the manufacturing sector in Kenya," Journal of Economic Behavior & Organization, Elsevier, vol. 49(4), pages 473-486, December.
    43. 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 615-641, August.
    44. Clay, Karen, 1997. "Trade without Law: Private-Order Institutions in Mexican California," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 13(1), pages 202-231, April.
    45. Lars Börner & John William Hatfield, 2017. "The Design of Debt-Clearing Markets: Clearinghouse Mechanisms in Preindustrial Europe," Journal of Political Economy, University of Chicago Press, vol. 125(6), pages 1991-2037.
    46. Ramseyer, J Mark, 1991. "Legal Rules in Repeated Deals: Banking in the Shadow of Defection in Japan," The Journal of Legal Studies, University of Chicago Press, vol. 20(1), pages 91-117, January.
    47. Greif, Avner, 1994. "Cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualist Societies," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 912-950, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Beck, T.H.L., 2010. "Legal Institutions and Economic Development," Other publications TiSEM 8aa07b48-ce55-4cf6-8754-7, Tilburg University, School of Economics and Management.
    2. Vincenzo Scoppa, 2003. "Contratti incompleti ed enforcement endogeno. Una rassegna della letteratura," Economia politica, Società editrice il Mulino, issue 3, pages 391-440.
    3. Beckmann, Volker & Boger, Silke, 2004. "Courts and contract enforcement in transition agriculture: theory and evidence from Poland," Agricultural Economics, Blackwell, vol. 31(2-3), pages 251-263, December.
    4. Beckmann, Volker & Boger, Silke, 2003. "Courts And Contract Enforcement In Agricultural Transition - Theory And Evidence From Poland," 2003 Annual meeting, July 27-30, Montreal, Canada 22213, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Papaioannou, Elias & Karatza, Stavroula, 2018. "The Greek Justice System: Collapse and Reform," CEPR Discussion Papers 12731, Centre for Economic Policy Research.
    6. Fahn, Matthias & MacLeod, W. Bentley & Muehlheusser, Gerd, 2023. "Past and Future Developments in the Economics of Relational Contracts," IZA Discussion Papers 16427, IZA Network @ LISER.
    7. W. Bentley MacLeod, 2006. "Reputations, Relationships and the Enforcement of Incomplete Contracts," CESifo Working Paper Series 1730, CESifo.
    8. Panayotis Kapopoulos & Anastasios Rizos, 2024. "Judicial efficiency and economic growth: Evidence based on European Union data," Scottish Journal of Political Economy, Scottish Economic Society, vol. 71(1), pages 101-131, February.
    9. Arne Bigsten & Paul Collier & Stefan Dercon & Marcel Fafchamps & Bernard Gauthier & Jan Willem Gunning & Abena Oduro & Remco Oostendorp & Cathy Patillo & Måns Soderbom & Francis Teal & Albert Zeufack, 2000. "Contract flexibility and dispute resolution in African manufacturing," Journal of Development Studies, Taylor & Francis Journals, vol. 36(4), pages 1-37.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:jinter:v:38:y:2026:i:2:p:233-258. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.