Standardized Enforcement: Access to Justice vs Contractual Innovation

Enrico Perotti and Nicola Gennaioli

No 8478, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We model the different ways in which precedents and contract standardization shape the joint development of markets and the law. In a setting where more resourceful parties can distort contract enforcement, we find that the introduction of standard contracts reduces enforcement distortions relative to precedents, exerting two effects: i) it statically expands the volume of trade, but ii) it hampers commercial and legal innovation by crowding out the use of innovative contracts. We offer a rationale for the large scale commercial codification that occurred in Common Law systems in the XIX century during a period of booming commerce and long distance trade.

Keywords: Imperfect judicial enforcement; Optimal contracts (search for similar items in EconPapers)
JEL-codes: K00 (search for similar items in EconPapers)
Date: 2011-07
New Economics Papers: this item is included in nep-law
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Standardized Enforcement: Access to Justice vs. Contractual Innovation (2015)
Working Paper: Standardized enforcement: Access to justice vs contractual innovation (2012)
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