Trade Credit and Contract Enforcement Reforms: Evidence from a Natural Experiment in India

This paper tests an idea from relational contracting theory [Macauley (1963); North (1990); Greif (1994); Kranton (1996)] that informal relationships can substitute for formal contract enforcement through the judicial system, from the analysis of a new survey of the surgical instrument cluster in Sialkot, Pakistan. Inter-firm trust is thought to lead to reduced transaction costs (a passive benefit of a cluster). Considered here are exchanges of goods between clustered suppliers and their customers, who are either members of the cluster or firms that interact frequently with it. Inter-firm trust is measured as the amount of trade credit offered to customers. The results show that suppliers are more likely to offer trade credit when they believe in the effectiveness of formal contract enforcement and when they participate in business networks (proxied by inter-firm communication). There is also some evidence that customer lock-in helps to develop inter-firm trust since firms give more credit when relationships are of longer duration, and as locked-in customers are less able to find alternate suppliers.

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Debt Contract Enforcement and Conservatism: Evidence from a Natural Experiment

SSRN Electronic Journal ◽

10.2139/ssrn.2661033 ◽

2015 ◽

Cited By ~ 1

Author(s):

Cyrus Aghamolla ◽

Nan Li

Keyword(s):

Natural Experiment ◽

Contract Enforcement ◽

Debt Contract

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Getting the Measure of Twins

10.3366/edinburgh/9781474400046.003.0005 ◽

2018 ◽

Author(s):

William Viney

Keyword(s):

Environmental Effects ◽

Natural Experiment ◽

Human Genetics ◽

Scientific Research ◽

Identical Twin ◽

Social Scientists ◽

Modern Biology ◽

Stephen Jay Gould

Stephen Jay Gould, the biologist and author, once joked that were he an identical twin raised separately from his brother they could ‘hire ourselves out to a host of social scientists and practically name our fee’. In order to monetise Gould’s fantasy, one would want a form of twinship that could operate according to evidential, experimental, somatic and circumstantial ideals. And Gould admits that he and his brother would need to be viewed as ‘the only really adequate natural experiment for separating genetic from environmental effects in humans’. This chapter seeks to interrogate the evidential and experimental circumstances that may underpin the comic quips that guide modern biology. In human genetics, twins are used as experimental bodies that are made to matter in particular ways and for particular people; they become newly ‘animate’ for being enrolled into scientific research. Raised in cultures assumed to be alike or dissimilar, isolated by researchers for being valuable in the measured disentanglement of assembled molecular agents (which are sometimes distinguished from an assemblage referred to as an ‘environment’), twins achieve a status of experimental significance not just for what they do but also for what they are taken to be.

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