Does Trade Foster Contract Enforcement?

James Anderson

No 672, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: 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. In the model of this paper, such a positive knock-on effect occurs when the elasticity of supply of traders is sufficiently high. Negative knock-on is possible when the elasticity is low. Enforcement strategies in competing markets are complements (substitutes) if the supply of traders is sufficiently elastic (inelastic). The model provides a useful structure of endogenous enforcement that gives promise of explaining patterns of institutional development.

Keywords: trade; contract enforcement; institutional development (search for similar items in EconPapers)
JEL-codes: F10 K42 O17 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2007-07-21
New Economics Papers: this item is included in nep-int and nep-law
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Published, Economic Theory, 41, 105-131, 2009

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Journal Article: Does trade foster contract enforcement? (2009)
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