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Contract enforcement in transition
The mix of formal and informal mechanisms for contract enforcement is examined
using survey data from Poland, Romania, Russia, the Slovak Republic and
Ukraine. Using the size of trade credit to quantify the success of
contracting, we ask: Do the courts have a perceptible effect on contracting?
When can a firm rely on its customer to repay trade credit voluntarily? Which
is more effective, the courts or relational contracting? Do trade associations
play a role in contract enforcement? Does relational contracting entail
inefficiencies? Is the reliance on relation contracting merely a transitory
phenomenon, reflecting the inadequacy of these countries’ legal systems?
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