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Development and the interaction of enforcement institutions
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Dhillon, Amrita and Rigolini, Jamele. (2011) Development and the interaction of enforcement institutions. Journal of Public Economics, Vol.95 (No.1-2). pp. 79-87. ISSN 0047-2727
This is the latest version of this item.
Official URL: http://dx.doi.org/10.1016/j.jpubeco.2010.09.013
Abstract
We examine how formal and informal contract enforcing institutions interact in a competitive market with asymmetric information where consumers do not observe quality before purchase. Firm level incentives for producing high quality can be achieved with an informal enforcement mechanism, reputation, the efficacy of which is enhanced by consumers investing in "connectedness:" or with a formal mechanism, legal enforcement, the effectiveness of which can be reduced by means of bribes. We show that formal and informal enforcement mechanisms do not necessarily substitute each other: while high levels of judicial efficiency decrease consumers' incentives to connect, higher consumers' connectedness leads to higher levels of judicial efficiency. We then look at how the equilibrium institutional mix evolves with the level of development. In doing so we show the presence of a new, physical, channel that can affect institutions-i.e. the frequency of bad productivity shocks that, in less developed settings, can impact on firms' incentives to cheat. (C) 2010 Elsevier B.V. All rights reserved.
| Item Type: | Journal Article |
|---|---|
| Subjects: | H Social Sciences > HF Commerce |
| Divisions: | Faculty of Social Sciences > Economics |
| Series Name: | Warwick economic research papers |
| Journal or Publication Title: | Journal of Public Economics |
| Publisher: | Elsevier |
| Place of Publication: | Coventry |
| ISSN: | 0047-2727 |
| Date: | February 2011 |
| Volume: | Vol.95 |
| Number: | No.1-2 |
| Page Range: | pp. 79-87 |
| Identification Number: | 10.1016/j.jpubeco.2010.09.013 |
| Status: | Peer Reviewed |
| Publication Status: | Published |
| Access rights to Published version: | Restricted or Subscription Access |
| URI: | http://wrap.warwick.ac.uk/id/eprint/41729 |
Data sourced from Thomson Reuters' Web of Knowledge
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Development and the interaction of enforcement institutions. (deposited 11 Sep 2009 13:53)
- Development and the interaction of enforcement institutions. (deposited 14 Feb 2012 15:31) [Currently Displayed]
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