A Research Agenda for New Institutional Economics
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A Research Agenda for New Institutional Economics

Edited by Claude Ménard and Mary M. Shirley

Consisting of 30 concise chapters written by top scholars, this Research Agenda probes the knowledge frontiers of issues long at the forefront of New Institutional Economics (NIE), including government, contracts and property rights. It examines pressing research questions surrounding norms, culture, and beliefs. It is designed to inform and inspire students and those starting their careers in economics, law and political science. Well-established scholars will also find the book invaluable in updating their understanding of crucial research questions and seeking new areas to explore.
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Chapter 6: A mutually beneficial relationship: relational contracts in developing countries

Rocco Macchiavello

Abstract

Imperfect contract enforcement is a pervasive feature of real-life commercial transactions. Consequently, trading parties rely on long-term relationships based on trust, reputation, and the promise of future rents, to guarantee contractual performance. Developing countries offer fertile ground for studying such relational contracts (RCs) since the market failures and organizational responses are starker, there are fertile opportunities to test theory isolating confounding factors, and a deeper understanding can help design better policies. This chapter reviews recent contributions that highlight the empirical content of RC models, different empirical strategies to test for the presence and quantify the value of RCs in observational data, the interaction between informal RCs and formal governance structures and evidence of how RCs alter market functioning. The chapter highlights promising avenues for further research in this exciting area, not only between firms, but within firms and public bureaucracies, between state and other actors, in informal community organizations, and so on.

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