The cost of enforcing contracts is a key determinant of market performance. We document this point with reference to the credit market in a model of opportunistic debtors and inefficient courts. According to the model, improvements in judicial efficiency should reduce credit constraints and increase lending, with an ambiguous effect on interest rates that depends on banking competition and on the type of judicial reform. These predictions are supported by panel data on Italian provinces. In provinces with longer trials or large backlogs of pending trials, credit is less widely available.

Courts and Banks: Effects of Judicial Enforcement on Credit Markets

JAPPELLI, TULLIO;PAGANO, MARCO;
2005

Abstract

The cost of enforcing contracts is a key determinant of market performance. We document this point with reference to the credit market in a model of opportunistic debtors and inefficient courts. According to the model, improvements in judicial efficiency should reduce credit constraints and increase lending, with an ambiguous effect on interest rates that depends on banking competition and on the type of judicial reform. These predictions are supported by panel data on Italian provinces. In provinces with longer trials or large backlogs of pending trials, credit is less widely available.
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11588/200808
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 188
  • ???jsp.display-item.citation.isi??? 180
social impact