IDEAS home Printed from https://ideas.repec.org/p/zbw/dicedp/276.html
   My bibliography  Save this paper

The rule of law and the emergence of market exchange: A new institutional economic perspective

Author

Listed:
  • Haucap, Justus

Abstract

Markets, where buyers and sellers can exchange goods and services, are key to the division of labor, specialisation, the realisation of economies of scale and scope and, therefore, economic prosperity, growth and development. The better markets work the easier it is to reap the benefits of specialisation and the gains from trade and voluntary exchange. For the emergence of market exchange, in turn, stable and secure property rights are key. These rights should be defined as clearly as possible and be as stable and secure as possible, in order to foster investment and to incentivize the careful and diligent treatment of assets. Hence, the rule of law and secure property rights go hand in hand with the emergence of markets, gains from trade and economic growth and prosperity.

Suggested Citation

  • Haucap, Justus, 2017. "The rule of law and the emergence of market exchange: A new institutional economic perspective," DICE Discussion Papers 276, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  • Handle: RePEc:zbw:dicedp:276
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/172004/1/1007488085.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. John McMillan & Christopher Woodruff, 1999. "Interfirm Relationships and Informal Credit in Vietnam," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1285-1320.
    2. Fafchamps Marcel, 2002. "Spontaneous Market Emergence," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 2(1), pages 1-37, June.
    3. Daniel F. Spulber, 1996. "Market Microstructure and Intermediation," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 135-152, Summer.
    4. 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.
    5. Gould, John P, 1980. "The Economics of Markets: A Simple Model of the Market-making Process," The Journal of Business, University of Chicago Press, vol. 53(3), pages 167-187, July.
    6. Darby, Michael R & Karni, Edi, 1973. "Free Competition and the Optimal Amount of Fraud," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 67-88, April.
    7. Daron Acemoglu & James A. Robinson, 2013. "Economics versus Politics: Pitfalls of Policy Advice," Journal of Economic Perspectives, American Economic Association, vol. 27(2), pages 173-192, Spring.
    8. Florian Scheuer & Alexander Wolitzky, 2016. "Capital Taxation under Political Constraints," American Economic Review, American Economic Association, vol. 106(8), pages 2304-2328, August.
    9. Klein, Benjamin, 1980. "Transaction Cost Determinants of "Unfair" Contractual Arrangements," American Economic Review, American Economic Association, vol. 70(2), pages 356-362, May.
    10. Fafchamps, Marcel, 2000. "Ethnicity and credit in African manufacturing," Journal of Development Economics, Elsevier, vol. 61(1), pages 205-235, February.
    11. Timur Kuran, 1997. "Islam and Underdevelopment: An Old Puzzle Revisited," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 153(1), pages 1-41, March.
    12. Coleman, James S, 1991. "Constructed Organization: First Principles," Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 7-23, Special I.
    13. Elinor Ostrom, 2010. "Beyond Markets and States: Polycentric Governance of Complex Economic Systems," American Economic Review, American Economic Association, vol. 100(3), pages 641-672, June.
    14. Barzel, Yoram, 1982. "Measurement Cost and the Organization of Markets," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 27-48, April.
    15. North, Douglass C, 1994. "Economic Performance through Time," American Economic Review, American Economic Association, vol. 84(3), pages 359-368, June.
    16. Weingast, Barry R, 1995. "The Economic Role of Political Institutions: Market-Preserving Federalism and Economic Development," Journal of Law, Economics, and Organization, Oxford University Press, vol. 11(1), pages 1-31, April.
    17. Posner, Richard A, 1980. "A Theory of Primitive Society, with Special Reference to Law," Journal of Law and Economics, University of Chicago Press, vol. 23(1), pages 1-53, April.
    18. Coase, R H, 1988. "The Nature of the Firm: Influence," Journal of Law, Economics, and Organization, Oxford University Press, vol. 4(1), pages 33-47, Spring.
    19. Fafchamps, Marcel & Minten, Bart, 2001. "Property Rights in a Flea Market Economy," Economic Development and Cultural Change, University of Chicago Press, vol. 49(2), pages 229-267, January.
    20. William M. Dugger, 1996. "The Mechanisms of Governance," Journal of Economic Issues, Taylor & Francis Journals, vol. 30(4), pages 1212-1216, December.
    21. Antony W. Dnes, 2011. "Franchise Contracts," Chapters, in: Gerrit De Geest (ed.), Contract Law and Economics, chapter 18, Edward Elgar Publishing.
    22. Fafchamps, Marcel, 1997. "Trade credit in Zimbabwean manufacturing," World Development, Elsevier, vol. 25(5), pages 795-815, May.
    23. Haugland, Sven A. & Cronhaug, Kjell, 1996. "Cooperative relationships in competitive markets," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 25(3), pages 359-371.
    24. Furubotn, Eirik G & Pejovich, Svetozar, 1972. "Property Rights and Economic Theory: A Survey of Recent Literature," Journal of Economic Literature, American Economic Association, vol. 10(4), pages 1137-1162, December.
    25. Telser, Lester G & Higinbotham, Harlow N, 1977. "Organized Futures Markets: Costs and Benefits," Journal of Political Economy, University of Chicago Press, vol. 85(5), pages 969-1000, October.
    26. Jean Ensminger, 1997. "Transaction Costs and Islam: Explaining Conversion in Africa," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 153(1), pages 1-4, March.
    27. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 2, number 2, 00.
    28. Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-329, March-Apr.
    29. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
    30. 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.
    31. McMillan, John & Woodruff, Christopher, 1999. "Dispute Prevention without Courts in Vietnam," Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(3), pages 637-658, October.
    32. 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.
    33. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 1, number 1, 00.
    34. Victor P. Goldberg, 1976. "Regulation and Administered Contracts," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 426-448, Autumn.
    35. Geertz, Clifford, 1978. "The Bazaar Economy: Information and Search in Peasant Marketing," American Economic Review, American Economic Association, vol. 68(2), pages 28-32, May.
    36. 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)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Haucap, Justus & Kehder, Christiane, 2018. "Welchen Ordnungsrahmen braucht die Sharing Economy?," DICE Ordnungspolitische Perspektiven 94, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    2. Justus Haucap, 2020. "Nobelpreis für Robert Wilson und Paul Milgrom: Zwei Ökonomen, die echte Märkte schufen [Nobel Prize for Robert Wilson and Paul Milgrom: Two Economists who Created Real Markets]," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 100(12), pages 969-975, December.

    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. 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.
    2. Grolleau, Gilles & Caswell, Julie A., 2006. "Interaction Between Food Attributes in Markets: The Case of Environmental Labeling," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 31(3), pages 1-14, December.
    3. 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).
    4. Maze, Armelle, 2006. "Multilateral reputation mechanisms and contract law in agriculture : complement or substitutes," 2006 Annual meeting, July 23-26, Long Beach, CA 21285, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Troya-Martinez, Marta, 2017. "Self-enforcing trade credit," International Journal of Industrial Organization, Elsevier, vol. 52(C), pages 333-357.
    6. Fafchamps Marcel, 2002. "Spontaneous Market Emergence," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 2(1), pages 1-37, June.
    7. Raynaud, Emmanuel & Sauvee, Loïc, 1999. "Common labelling and producer organisations: a transaction cost economics approach," 67th Seminar, October 28-30, 1999, LeMans, France 241743, European Association of Agricultural Economists.
    8. Felipe Balmaceda, 2004. "Network Formation and Cooperation," Econometric Society 2004 Latin American Meetings 208, Econometric Society.
    9. Janvier D. Nkurunziza, 2005. "Reputation and Credit without Collateral in Africa`s Formal Banking," Economics Series Working Papers WPS/2005-02, University of Oxford, Department of Economics.
    10. Pyle, William, 2006. "Resolutions, recoveries and relationships: The evolution of payment disputes in Central and Eastern Europe," Journal of Comparative Economics, Elsevier, vol. 34(2), pages 317-337, June.
    11. Bramoullé, Yann & Goyal, Sanjeev, 2016. "Favoritism," Journal of Development Economics, Elsevier, vol. 122(C), pages 16-27.
    12. Sanchez-Pages Santiago & Straub Stéphane, 2010. "The Emergence of Institutions," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-38, September.
    13. Armelle Mazé & Claude Ménard, 2010. "Private ordering, collective action, and the self-enforcing range of contracts," European Journal of Law and Economics, Springer, vol. 29(1), pages 131-153, February.
    14. 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

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:zbw:dicedp:276. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/diduede.html .

    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: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/diduede.html .

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.