In this paper we theoretically and empirically examine how the interaction between the formal court system and the informal loan network affects a household's decision to start a business. We find that when the formal court system is weak, expansion of informal credit network leads to the...

Because entrepreneurial activity can stimulate job creation and long-term economic growth, promoting entrepreneurship is an important goal. However, many financial, bureaucratic, and social barriers can shortcircuit the process of actually starting a business, especially in transition economies...