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Standardized enforcement: Access to justice vs contractual innovation

  • Nicola Gennaioli
  • Enrico Perotti

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.

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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1329.

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Date of creation: Apr 2009
Date of revision: Jun 2012
Handle: RePEc:upf:upfgen:1329
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