Contract enforcement, litigation, and economic development

Baptiste Massenot ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper introduces a model of litigation in a growth framework. Investors use litigation to enforce their financial contracts with entrepreneurs. A contest ensues in which both agents hire lawyers to increase their probability of winning the trial. The issue and the cost of the contest determine how much investors are willing to lend. More lawyers are hired when judicial efficiency is lower and damages are higher. Higher judicial efficiency and tighter restrictions on the supply of lawyers benefit the economy, while the impact of higher damages is ambiguous. Some empirical evidence is also presented.

Keywords: contract enforcement; litigation; lawyers; economic development (search for similar items in EconPapers)
JEL-codes: K41 O16 (search for similar items in EconPapers)
Date: 2010-12
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Contract Enforcement, Litigation, and Economic Development (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:27501

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