We conduct a field experiment offering graduated microcredit clients the opportunity to finance a business asset worth four times their previous borrowing limit. We implement this using a hire-purchase contract; our control group is offered a zero-interest loan.
Firms use relational contracts to support repeated trade. Do these informal agreements evolve in response to market conditions? In a market for ice, firms reestablish relationships on new terms when a prior agreement breaks down.
Kelley, Lane and Schönholzer (2020) develop a relational contracting model to study the role of monitoring in firms and evaluate the model experimentally in the field.
The shift from subsistence to commercial economies creates surplus, but often induces conflict over it. Under extractive institutions and weak contract enforcement, crony capitalism may emerge and limit the benefits of modernization.
Economic growth requires confidence in the state's ability to enforce secure exchange. But when states selectively enforce rule of law, political considerations can moderate the trust that buyers have in sellers.
In countries with weakly institutionalized legal environments, private contract enforcement mechanisms arise to facilitate trade. This project focuses on cheating in business and the interaction between private contract enforcement and public legal institutions.
