Title: Does trade foster contract enforcement?
First published: 2008
Description: "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"--National Bureau of Economic Research web site.
LC classification: HB1