Formalizing Dispute Resolution: Effects of Village Courts in Bangladesh

74 Pages Posted: 29 Feb 2024

See all articles by Martin Mattsson

Martin Mattsson

National University of Singapore

Ahmed Mushfiq Mobarak

Yale School of Management; Yale University - Cowles Foundation

Date Written: February 27, 2024

Abstract

Disagreements over business deals, land boundaries, and loan non-repayments are common impediments to economic transactions. To resolve such disputes, people in low-income countries are often forced to choose between costly and slow formal courts, or informal Dispute Resolution Mechanisms (DRMs) that lack state-sanctioned enforcement powers. Can a decentralized judicial institution run by locally elected officials increase access to justice by combining the best aspects of formal and informal dispute resolution? Can such an institution decrease the burden on higher-level courts and increase investment and growth? We evaluate the effects of the government introducing Village Courts (VCs) in rural Bangladesh using a large-scale randomized controlled trial. The introduction of VCs more than doubled the share of disputes resolved in state-sanctioned courts, but the ubiquitous informal institution called shalish remains the most commonly used DRM. There is some substitution from shalish to VC, but the district court congestion, economic activities, and social dynamics remain unaffected. The elected leaders in charge of implementing VCs are also involved in settling shalish cases, and the potential of VCs is limited by the constraints on their time. Without further investment in state capacity, the VC cannot supplant the even more decentralized shalish system.

Keywords: Courts, Dispute resolution, Judicial systems, Institutional change

JEL Classification: K4, O17, P48

Suggested Citation

Mattsson, Martin and Mobarak, Ahmed Mushfiq, Formalizing Dispute Resolution: Effects of Village Courts in Bangladesh (February 27, 2024). Available at SSRN: https://ssrn.com/abstract=4740074 or http://dx.doi.org/10.2139/ssrn.4740074

Martin Mattsson (Contact Author)

National University of Singapore ( email )

1 Arts Link
AS2 04-39
Singapore, Singapore 117570
Singapore

HOME PAGE: http://www.martin-mattsson.com

Ahmed Mushfiq Mobarak

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-5787 (Phone)

HOME PAGE: http://mba.yale.edu/faculty/profiles/mobarak.shtml

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

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