Caste, Courts and Business

67 Pages Posted: 19 May 2022

See all articles by Tanika Chakraborty

Tanika Chakraborty

Indian Institute of Technology (IIT), Kanpur

Anirban Mukherjee

University of Calcutta

Sarani Saha

Indian Institute of Technology Kanpur

Divya Shukla

Indian Institute of Technology (IIT) Kanpur

Multiple version iconThere are 2 versions of this paper

Abstract

We study the role of formal institutions of contract enforcement in facilitating investments in small and medium firms(MSME). In a framework where established entrepreneurs can enforce contracts informally using their network ties and hierarchical advantage, we argue that an efficient formal judiciary helps entrepreneurs without any ties to informal business networks, disproportionately more. We test our theoretical prediction using a novel administrative panel-data from Indian courts and the nationally representative MSME survey data.Empirically, we treat entrepreneurs from disadvantaged castes (SC-ST) as those without traditional business-network ties. We find that improvement in court quality has a disproportionately larger impact on the investment decisions of SC-ST entrepreneurs. On average, if the time taken for a court to clear all existing cases reduces by 1 year, the initial gap in the probability of investing, between SC-ST and other entrepreneurs, gets reduced by 0.6-0.7 percentage points.

Keywords: judiciary, Duration Index, MSME, entrepreneurship

JEL Classification: K12, L26, O17

Suggested Citation

Chakraborty, Tanika and Mukherjee, Anirban and Saha, Sarani and Shukla, Divya, Caste, Courts and Business. IZA Discussion Paper No. 15037, Available at SSRN: https://ssrn.com/abstract=4114568 or http://dx.doi.org/10.2139/ssrn.4114568

Tanika Chakraborty (Contact Author)

Indian Institute of Technology (IIT), Kanpur ( email )

Kharagpur
Kanpur, Uttar Pradesh 208016
India

Anirban Mukherjee

University of Calcutta ( email )

Senate House, 87/1 College Street
Bagnan
Kolkata, 700073
India

Sarani Saha

Indian Institute of Technology Kanpur ( email )

IIT Kanpur
kalyanpur
Kanpur, 208016
India

Divya Shukla

Indian Institute of Technology (IIT) Kanpur ( email )

IIT Kanpur
kalyanpur
Kanpur, 208016
India

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
14
Abstract Views
59
PlumX Metrics