Development and the Interaction of Enforcement Institutions
The authors examine how institutions that enforce contracts between two parties-producers and consumers-interact in a competitive market with one-sided asymmetric information and productivity shocks. They compare an informal enforcement mechanism, reputation, the efficacy of which is enhanced by con...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2006/12/7259034/development-interaction-enforcement-institutions http://hdl.handle.net/10986/9280 |
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okr-10986-92802021-04-23T14:02:42Z Development and the Interaction of Enforcement Institutions Dhillon, Amrita Rigolini, Jamele ADVERSE SELECTION AGENTS AGRICULTURE APPLICATIONS ASYMMETRIC INFORMATION BUSINESS ASSOCIATIONS COMPARATIVE ADVANTAGE CONSUMERS DEVELOPMENT ECONOMICS DISCOUNT RATE ECONOMETRICS ECONOMIC PERFORMANCE EQUILIBRIUM EQUILIBRIUM PRICES EXPECTED UTILITY EXPORTS FIXED COSTS FREE ENTRY FUTURE RESEARCH IMPERFECT INFORMATION MARGINAL COST MARGINAL COSTS MARKET FORCES MARKET SHARE MORAL HAZARD NASH EQUILIBRIUM POLITICAL ECONOMY PREMIUMS PRICE COMPETITION PRISONERS DILEMMA PRODUCT MARKETS PRODUCT QUALITY PRODUCTIVITY PROPERTY RIGHTS SAVINGS SPREAD SUB-SAHARAN AFRICA SUBSTITUTE SUNK COSTS The authors examine how institutions that enforce contracts between two parties-producers and consumers-interact in a competitive market with one-sided asymmetric information and productivity shocks. They compare an informal enforcement mechanism, reputation, the efficacy of which is enhanced by consumers investing in "connectedness," with a formal mechanism, legal enforcement, the effectiveness of which can be reduced by producers by means of bribes. When legal enforcement is poor, consumers connect more with one another to improve informal enforcement. In contrast, a well-connected network of consumers reduces producers' incentives to bribe. In equilibrium, the model predicts a positive relationship between the frequency of productivity shocks, bribing, and the use of informal enforcement, providing a physical explanation of why developing countries often fail to have efficient legal systems. Firm-level estimations confirm the partial equilibrium implications of the model. 2012-06-26T19:19:07Z 2012-06-26T19:19:07Z 2006-12 http://documents.worldbank.org/curated/en/2006/12/7259034/development-interaction-enforcement-institutions http://hdl.handle.net/10986/9280 English en_US Policy Research Working Paper; No. 4090 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ADVERSE SELECTION AGENTS AGRICULTURE APPLICATIONS ASYMMETRIC INFORMATION BUSINESS ASSOCIATIONS COMPARATIVE ADVANTAGE CONSUMERS DEVELOPMENT ECONOMICS DISCOUNT RATE ECONOMETRICS ECONOMIC PERFORMANCE EQUILIBRIUM EQUILIBRIUM PRICES EXPECTED UTILITY EXPORTS FIXED COSTS FREE ENTRY FUTURE RESEARCH IMPERFECT INFORMATION MARGINAL COST MARGINAL COSTS MARKET FORCES MARKET SHARE MORAL HAZARD NASH EQUILIBRIUM POLITICAL ECONOMY PREMIUMS PRICE COMPETITION PRISONERS DILEMMA PRODUCT MARKETS PRODUCT QUALITY PRODUCTIVITY PROPERTY RIGHTS SAVINGS SPREAD SUB-SAHARAN AFRICA SUBSTITUTE SUNK COSTS |
| spellingShingle |
ADVERSE SELECTION AGENTS AGRICULTURE APPLICATIONS ASYMMETRIC INFORMATION BUSINESS ASSOCIATIONS COMPARATIVE ADVANTAGE CONSUMERS DEVELOPMENT ECONOMICS DISCOUNT RATE ECONOMETRICS ECONOMIC PERFORMANCE EQUILIBRIUM EQUILIBRIUM PRICES EXPECTED UTILITY EXPORTS FIXED COSTS FREE ENTRY FUTURE RESEARCH IMPERFECT INFORMATION MARGINAL COST MARGINAL COSTS MARKET FORCES MARKET SHARE MORAL HAZARD NASH EQUILIBRIUM POLITICAL ECONOMY PREMIUMS PRICE COMPETITION PRISONERS DILEMMA PRODUCT MARKETS PRODUCT QUALITY PRODUCTIVITY PROPERTY RIGHTS SAVINGS SPREAD SUB-SAHARAN AFRICA SUBSTITUTE SUNK COSTS Dhillon, Amrita Rigolini, Jamele Development and the Interaction of Enforcement Institutions |
| relation |
Policy Research Working Paper; No. 4090 |
| description |
The authors examine how institutions that enforce contracts between two parties-producers and consumers-interact in a competitive market with one-sided asymmetric information and productivity shocks. They compare an informal enforcement mechanism, reputation, the efficacy of which is enhanced by consumers investing in "connectedness," with a formal mechanism, legal enforcement, the effectiveness of which can be reduced by producers by means of bribes. When legal enforcement is poor, consumers connect more with one another to improve informal enforcement. In contrast, a well-connected network of consumers reduces producers' incentives to bribe. In equilibrium, the model predicts a positive relationship between the frequency of productivity shocks, bribing, and the use of informal enforcement, providing a physical explanation of why developing countries often fail to have efficient legal systems. Firm-level estimations confirm the partial equilibrium implications of the model. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Dhillon, Amrita Rigolini, Jamele |
| author_facet |
Dhillon, Amrita Rigolini, Jamele |
| author_sort |
Dhillon, Amrita |
| title |
Development and the Interaction of Enforcement Institutions |
| title_short |
Development and the Interaction of Enforcement Institutions |
| title_full |
Development and the Interaction of Enforcement Institutions |
| title_fullStr |
Development and the Interaction of Enforcement Institutions |
| title_full_unstemmed |
Development and the Interaction of Enforcement Institutions |
| title_sort |
development and the interaction of enforcement institutions |
| publisher |
World Bank, Washington, DC |
| publishDate |
2012 |
| url |
http://documents.worldbank.org/curated/en/2006/12/7259034/development-interaction-enforcement-institutions http://hdl.handle.net/10986/9280 |
| _version_ |
1764406806376873984 |