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Full-Text Articles in Industrial Organization
Contract Enforcement: A Political Economy Model Of Legal Development, Fali Huang
Contract Enforcement: A Political Economy Model Of Legal Development, Fali Huang
Research Collection School Of Economics
In an effort to understand why the relative usage of relational and legal contracts differs across societies, this article builds a political economy model of legal development where legal quality of contract enforcement is a costly public good. It finds that legal investment tends to be too small under elite rule but too large under majority rule in comparison with the socially optimal level. Furthermore, elite rule, low legal quality, and high-income inequality may form a self-perpetuating circle that hinders economic development. In contrast to the conventional view, this article suggests that the often-observed association between heavy reliance on relational …
On The Segmentation Of Markets, Nicolas L. Jacquet, Serene Tan
On The Segmentation Of Markets, Nicolas L. Jacquet, Serene Tan
Research Collection School Of Economics
This paper endogenizes the market structure of an economy with heterogeneous agents who want to form bilateral matches in the presence of search frictions and when utility is nontransferable. There exist infinitely many marketplaces, and each agent chooses which marketplace to be in: agents get to choose not only whom to match with but also whom they meet with. Perfect segmentation is obtained in equilibrium, where agents match with the first person they meet. All equilibria have the same matching pattern. Although perfect assortative matching is not obtained in equilibrium, the degree of assortativeness is greater than in standard models.