Contracting Institutions

49 Pages Posted: 19 Dec 2012

Date Written: December 18, 2012

Abstract

Property rights institutions, including contract enforcement, are recognized as a fundamental determinant to economic performance. However, understanding how to secure property remains elusive. This paper attempts to provide a theoretical framework and empirical analysis to unpack the black box of property rights. The framework entails distinguishing between private and public protection and subsequent enforcement mechanisms. Previous findings suggest that informal, cultural rules underlie constraints on government predation. Following this logic, this study asks how contract enforcement is achieved – through formal or informal mechanisms? After controlling for reverse causality, the empirical results suggest that informal cultural mechanisms protect against private predation and support contracting institutions while the formal institutions are insignificant. These results are robust to a variety of model specifications, multiple instrumental variables and a range of control variables.

Keywords: Property Rights, Contract Enforcement, Informal Institutions, Formal Institutions, Culture

JEL Classification: F55, O17

Suggested Citation

Williamson, Claudia R., Contracting Institutions (December 18, 2012). Available at SSRN: https://ssrn.com/abstract=2191298 or http://dx.doi.org/10.2139/ssrn.2191298

Claudia R. Williamson (Contact Author)

Mississippi State University ( email )

Box 9580
312K McCool Hall
Mississippi State, MS 39762
United States
7242558627 (Phone)

HOME PAGE: http://www.claudiawilliamson.com

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