Courts and Relational Contracts

70 Pages Posted: 25 Oct 2001 Last revised: 7 Dec 2001

See all articles by Simon Johnson

Simon Johnson

Massachusetts Institute of Technology (MIT) - Entrepreneurship Center; National Bureau of Economic Research (NBER)

John McMillan

CESifo (Center for Economic Studies and Ifo Institute)

Christopher M. Woodruff

University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS)

Multiple version iconThere are 3 versions of this paper

Date Written: October 2001

Abstract

Post-communist countries offer new evidence on the relative importance of courts and relationships in enforcing contracts. Belief in the effectiveness of courts has a significant positive effect on the level of trust shown in new relationships between firms and their customers. Well-functioning courts also encourage entrepreneurs to try out new suppliers. Courts are particularly important when specific investments are needed for a relationship to develop. While relationships can sustain existing interactions, workable courts help new interactions to start and develop.

Suggested Citation

Johnson, Simon and McMillan, John and Woodruff, Christopher, Courts and Relational Contracts (October 2001). NBER Working Paper No. w8572. Available at SSRN: https://ssrn.com/abstract=288485

Simon Johnson (Contact Author)

Massachusetts Institute of Technology (MIT) - Entrepreneurship Center ( email )

United States
617-253-8412 (Phone)
617-258-6855 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

John McMillan

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Christopher Woodruff

University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS) ( email )

9500 Gilman Drive
La Jolla, CA 92093-0519
United States
858-534-0590 (Phone)
858-534-3939 (Fax)

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