Why do rulers play by the rules? We show that the legality requirement under the rule of law implements an endogenous enforcement mechanism supporting constitutionality. Agents which do not obey unconstitutional legal norms are not sanctioned under constitutional rule. A principal who defects...

Purpose – The purpose of this paper is to analyze a market for microfinance in a region of a developing nation in which all projects are either of high or low quality. There is adverse selection because only borrowers know whether their project is of high or low quality but the microfinance...