Courts and Relational Contracts
John McMillan and
Christopher Woodruff ()
No 8572, NBER Working Papers from National Bureau of Economic Research, Inc
Post-communist countries offer new evidence on the relative importance of courts and relationships in enforcing contracts. Belief in the effectiveness of courts has a significant positive effect on the level of trust shown in new relationships between firms and their customers. Well-functioning courts also encourage entrepreneurs to try out new suppliers. Courts are particularly important when specific investments are needed for a relationship to develop. While relationships can sustain existing interactions, workable courts help new interactions to start and develop.
JEL-codes: D2 G0 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cdm, nep-eec, nep-law and nep-pol
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Published as Simon Johnson & John McMillan, 2002. "Courts and Relational Contracts," Journal of Law, Economics and Organization, Oxford University Press, vol. 18(1), pages 221-277, April.
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