This paper assesses the content, role, and adaptability of subjective beliefs about contract enforceability in the …

-natural experiment. We find that strengthening of contract enforcement determines large, significant, and persistent reductions of banks …

Under weak contract enforcement the trading parties’ trust, defined as their belief in other’s trustworthiness, appears … important for realizing gains from trade. In contrast, under strong contract enforcement beliefs about other’s trustworthiness … appear less important, suggesting that trust and contract enforcement are substitutes. Here we show, however, that trust and …