A Simple Model of Contract Enforcement Institutions

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalNot applicablepeer-review

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Author(s)

  • Takuma Kunieda
  • Keisuke Okada
  • Akihisa Shibata

Related Research Unit(s)

Detail(s)

Original languageEnglish
Pages (from-to)410-434
Journal / PublicationPacific Economic Review
Volume22
Issue number3
Early online date16 Mar 2016
Publication statusPublished - Aug 2017

Abstract

We demonstrate that in highly productive economies contract enforcement institutionsare endogenously established, and partnership contracts correct inefficient land allocation. In lessproductive economies, however, such institutions are not established, and partnership contracts arenot formed. In economies with intermediate productivity levels, multiple Nash equilibria exist; thatis, contract enforcement institutions are established in the high Nash equilibrium whereas they arenot formed in the low Nash equilibrium. In this case, institutional quality can be diverse acrosseconomies. We also prove that improvement in institutional quality reduces within-country inequal-ity. All these outcomes are consistent with cross-country observations.

Citation Format(s)

A Simple Model of Contract Enforcement Institutions. / Kunieda, Takuma; Okada, Keisuke; Shibata, Akihisa.

In: Pacific Economic Review, Vol. 22, No. 3, 08.2017, p. 410-434.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalNot applicablepeer-review