Does trade foster contract enforcement?
type: Item
instance of: scholarly article
title: Does trade foster contract enforcement?
zbMATH Open document ID: 1177.91091
author: James E. Anderson
published in: Economic Theory
publication date: 2009-08-27T00:00:00Z
full work available at URL: w14045.pdf
review text: The paper analyses the comparative statistics of a model of the demand for contract enforcement by traders. Building on previous work, the paper models imperfect contract enforcement as a parametric probability that a ``court'' will enforce a contract in default, and develops a theory of endogenous enforcement. The comparative statistics of enforcement are examined first in a single market and then in two independent markets in which competing groups of traders choose enforcement strategies. The results of the analysis indicate that contract enforcement is probabilistic, but the probability depends on rules and processes. A stimulus to trade may induce traders to alter rules or processes to improve enforcement. Such positive knock-on effects occur when the elasticity of supply of traders is sufficiently high, while negative knock-on effects are possible when the elasticity is low. The model provides a useful structure of endogeneous enforcement that gives promise of explaining patterns of institutional development.
Mathematics Subject Classification ID: 91B60
Mathematics Subject Classification ID: 91A99
Mathematics Subject Classification ID: 91B06
zbMATH DE Number: 5598856
zbMATH Keywords: trade
zbMATH Keywords: imperfect contract enforcement
zbMATH Keywords: endogeneous institutions
zbMATH Keywords: liberalization
reviewed by: Vangelis Grigoroudis
MaRDI profile type: Publication
OpenAlex ID: W2159968818
DOI: 10.1007/S00199-008-0378-0
description: scientific article; zbMATH DE number 5598856