The costs of enforcing contracts is a key determinant of market performance. We document this point with reference to the credit market. We start by presenting a model of opportunistic debtors and inefficient courts. According to the model, improvements in judicial efficiency reduce credit...

The paper analyzes the relationship between decision rules and information acquisition in decision-making processes. The setting under consideration is one where information acquisition and decision making are assigned to different agents and the decision-maker's preferences are not observable....

This paper analyses the effect of the degree of the legal enforcement of credit contracts on the level of private investment. We use a model of corporate finance with moral hazard and collateralized asset. We introduce in the model a third agent: the government, which is responsible for the...

This paper provides empirical evidence on whether child legal status at birth affects the level of cultural integration of immigrant parents with native community. We consider the 1999 reform of the German nationality law, which introduced birthright citizenship for children born in Germany to...

This paper investigates the interaction between legal institutions and financial arrangements and the effects that these have on corporate decisions and aggregate activity, both theoretically and empirically. In the theoretical part, we develop a two country general equilibrium model with...

We exploit the Collective Clemency Bill passed by the Italian Parliament in July 2006 to evaluate the indirect effects of a policy that randomly commutes actual sentences to expected sentences for 40 percent of the Italian prison population. We estimate the direct and indirect impact of the...

We analyze how the law and its enforcement affect equity market equilibrium. Improvements in the legal system, while invariably associated with broader equity markets, have different effects on equity returns depending on the institutional change considered and on the degree of international...

This paper presents a political economy model where there is mutual feedback between investor protection and stock market development. Better investor protection induces companies to issue more equity and thereby leads to a broader stock market. In turn, equity issuance expands the shareholder...

Multiple bank lending creates an incentive to overborrow and default. When creditor rights are poorly protected and collateral value is volatile, this incentive leads to rationing and non-competitive interest rates. If banks share information about past debts via credit reporting systems, the...

How does the punishment for default affect repayment behavior? We use administrative data provided by the leading Italian lender of unsecured credit to the household sector to investigate the effect of two potentially important factors: judicial efficiency and the availability of informal credit...