Caste, Courts and Business

Arbeitspapier

We study the role of formal institutions of contract enforcement in facilitating investments in small and medium firms(MSME). In a framework where established entrepreneurs can enforce contracts informally using their network ties and hierarchical advantage, we argue that an efficient formal judiciary helps entrepreneurs without any ties to informal business networks, disproportionately more. We test our theoretical prediction using a novel administrative panel-data from Indian courts and the nationally representative MSME survey data. Empirically, we treat entrepreneurs from disadvantaged castes (SC-ST) as those without traditional business-network ties. We find that improvement in court quality has a disproportionately larger impact on the investment decisions of SC-ST entrepreneurs. On average, if the time taken for a court to clear all existing cases reduces by 1 year, the initial gap in the probability of investing, between SC-ST and other entrepreneurs, gets reduced by 0.6-0.7 percentage points.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 15037

Classification and Topics

• Classification: Wirtschaft ; Contract Law ; Entrepreneurship ; Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
• Subject: judiciary ; Duration Index ; MSME ; entrepreneurship

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Chakraborty, Tanika ; Mukherjee, Anirban ; Saha, Sarani ; Shukla, Divya
• Event: Veröffentlichung
• (who): Institute of Labor Economics (IZA)
• (where): Bonn
• (when): 2022

Further information

• Handle: http://hdl.handle.net/10419/250698
• Last update: 10.03.2025, 11:44 AM CET