The Inefficiency of the Judiciary and Alternative Forms of Social Control: A Case Study of Rental Contracts in Brazil
Rangel, Gustavo Borges
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https://hdl.handle.net/2142/85679
Description
Title
The Inefficiency of the Judiciary and Alternative Forms of Social Control: A Case Study of Rental Contracts in Brazil
Author(s)
Rangel, Gustavo Borges
Issue Date
2000
Doctoral Committee Chair(s)
Lee Alston
Department of Study
Economics
Discipline
Economics
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Political Science, Public Administration
Language
eng
Abstract
The main purpose of this study is to analyze how institutions, the legal system among them, affect the economic performance of a country. Specifically, a malfunctioning legal system creates uncertainties that might hamper the completion of new transactions, particularly those involving previously unfamiliar parties. As a result, by narrowing the scope of trades, it hinders specialization and the exploitation of economies of scale; it discourages investment; and it distorts the price system with the introduction of additional risk premiums. These issues are illustrated with the case of the rental markets in Brazil. Specifically, empirical tests are used to estimate the risk premium associated with the reliance on an inefficient judicial system. The magnitude of the premium found in the test indicates the relevance and the potential benefits of improving the legal system. Also presented is a survey of the literature on social control stressing the role of non-legal sources of ordering in a society. A special emphasis is given to the works of Robert Ellickson and Donald Black. Then, an empirical test of this theory is performed and the results obtained substantially support it in the context of rental contracts in Brazil.
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