Caste, Courts and Business
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.
Year of publication: |
2021
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Authors: | Chakraborty, Tanika ; Mukherjee, Anirban ; Saha, Sarani ; Shukla, Divya |
Publisher: |
Essen : Global Labor Organization (GLO) |
Subject: | Judiciary | Duration Index | MSME | Entrepreneurship |
Saved in:
freely available
Series: | GLO Discussion Paper ; 935 |
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Type of publication: | Book / Working Paper |
Type of publication (narrower categories): | Working Paper |
Language: | English |
Other identifiers: | 1771733934 [GVK] hdl:10419/241984 [Handle] RePEc:zbw:glodps:935 [RePEc] |
Classification: | K12 - Contract Law ; L26 - Entrepreneurship ; O17 - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements |
Source: |
Persistent link: https://www.econbiz.de/10012621484