Costs of Enforcement in Developing Countries with Credit Market Imperfections

18 Pages Posted: 27 May 2004

See all articles by Munetomo Ando

Munetomo Ando

ARISH, Nihon University

Noriyuki Yanagawa

University of Tokyo - Faculty of Economics

Date Written: May 2004

Abstract

This paper examines the development processes of a country when the degree of verifiability is endogenously determined. We assume that labor input into the enforcement sector is necessary for improving the degree of verifiability. The main result is that although efforts to improve verifiability are important, the determinants of the wages for enforcers, that include the income distribution of the country, are crucial in efforts to implement development processes. Moreover, this paper explains the situation in which a country has high growth rates temporarily even if the technology for contract enforcement is poor, but eventually experiences economic collapse.

Keywords: Credit market imperfection, quality of contract enforcement, degree of verifiability, legal institutions

JEL Classification: E44, F43, O11

Suggested Citation

Ando, Munetomo and Yanagawa, Noriyuki, Costs of Enforcement in Developing Countries with Credit Market Imperfections (May 2004). Available at SSRN: https://ssrn.com/abstract=550461 or http://dx.doi.org/10.2139/ssrn.550461

Munetomo Ando (Contact Author)

ARISH, Nihon University ( email )

12-5, Goban-cho, Chiyoda-ku
Tokyo, 102-8251
Japan

Noriyuki Yanagawa

University of Tokyo - Faculty of Economics ( email )

7-3-1 Hongo, Bunkyo-ku
Tokyo 113-0033
Japan

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