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Standardized Enforcement: Access to Justice vs. Contractual Innovation

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  • Nicola Gennaioli
  • Enrico Perotti

Abstract

We model the different ways in which precedents and contract standardization shape the development of markets and the law. In a setup where more resourceful parties can distort contract enforcement to their advantage, we find that the introduction of a standard contract reduces enforcement distortions relative to precedents, exerting two effects: i) it statically expands the volume of trade, but ii) it crowds out the use of innovative contracts, hindering contractual innovation. We shed light on the large scale commercial codification occurred in the 19th century in many countries (even Common Law ones) during a period of booming commerce and long distance trade.

Suggested Citation

  • Nicola Gennaioli & Enrico Perotti, 2012. "Standardized Enforcement: Access to Justice vs. Contractual Innovation," Working Papers 652, Barcelona Graduate School of Economics.
  • Handle: RePEc:bge:wpaper:652
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    References listed on IDEAS

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    Cited by:

    1. Ari Van Assche & Galina A. Schwartz, 2013. "Contracting Institutions and Ownership Structure in International Joint Ventures," CIRANO Working Papers 2013s-04, CIRANO.
    2. Massenot, Baptiste, 2011. "Financial development in adversarial and inquisitorial legal systems," Journal of Comparative Economics, Elsevier, vol. 39(4), pages 602-608.
    3. Vladimir Asriyan, 2015. "Balance sheet recessions with informational and trading frictions," Economics Working Papers 1463, Department of Economics and Business, Universitat Pompeu Fabra, revised Feb 2016.
    4. Massenot, Baptiste, 2010. "Contract enforcement, litigation, and economic development," MPRA Paper 27501, University Library of Munich, Germany.
    5. Van Assche, Ari & Schwartz, Galina A., 2013. "Contracting institutions and ownership structure in international joint ventures," Journal of Development Economics, Elsevier, vol. 103(C), pages 124-132.

    More about this item

    Keywords

    contracting; standardization; Inequality; legal evolution;

    JEL classification:

    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • G3 - Financial Economics - - Corporate Finance and Governance

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