On the Determinants and Consequences of Informal Contracting

16 Pages Posted: 29 Oct 2018

See all articles by Ricard Gil

Ricard Gil

Queen's University (Canada) - Smith School of Business; Johns Hopkins University - Carey Business School

Giorgio Zanarone

CUNEF

Multiple version iconThere are 2 versions of this paper

Date Written: Winter 2018

Abstract

As documented by Macauley and others, informal contracts are pervasive in modern economies. Yet, systematic empirical evidence on them is still limited. In this paper, we provide a framework to investigate the determinants and consequences of informal contracting. First, we present an illustrative model that organizes key predictions from the theoretical literature. Next, we discuss selected empirical works that shed light on the model's relevance and testability. Overall, we find combined support for most theoretical predictions from the model, and we observe that significant progress has been made over time at measuring key determinants of informal contracting such as the parties’ discount factor and fallback option. We conclude by discussing strategies for testing theoretical predictions for which conclusive evidence is still missing.

Suggested Citation

Gil, Ricard and Zanarone, Giorgio, On the Determinants and Consequences of Informal Contracting (Winter 2018). Journal of Economics & Management Strategy, Vol. 27, Issue 4, pp. 726-741, 2018. Available at SSRN: https://ssrn.com/abstract=3273534 or http://dx.doi.org/10.1111/jems.12246

Ricard Gil (Contact Author)

Queen's University (Canada) - Smith School of Business ( email )

Smith School of Business - Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

HOME PAGE: http://carey.jhu.edu

Giorgio Zanarone

CUNEF ( email )

Leonardo Prieto Castro 2
Madrid, Madrid 28040
Spain

HOME PAGE: http://gzanarone.cunef.edu

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