We study a contracting model with unforeseen contingencies in which the court is an active player. Ex-ante, the contracting parties cannot include the risky unforeseen contingencies in the contract they draw up. Ex-post the court observes whether an unforeseen contingency occurred, and decides...

This Paper studies the design of lawmaking and law enforcement institutions based on the premise that law is inherently incomplete. Under incomplete law, law enforcement by courts may suffer from deterrence failure. As a potential remedy, a regulatory regime is introduced. The major functional...

Should arbitrators adjudicate on the basis of their own investigations, or invite the interested parties to make their cases and decide on the basis of the information so gathered? I call the former the inquisitorial procedure in arbitration and the latter the adversarial procedure. I conduct a...

This paper documents the evolution of the legal independence of the Bank of Israel since its creation in 1954 to present times, provides an international comparison, and assesses the changes in the actual independence of the Bank on a yearly basis following the 1985 stabilization of inflation....

In a model where biased judges can distort contract enforcement, we uncover positive feedback effects between the use of innovative contracts and legal evolution that improve verifiability and contracting over time. We find, however, that the cost of judicial bias also grows over time because...

Economists generally assume the existence of sufficient institutions to sustain a market economy and tax the citizens. However, this starting point cannot easily be taken for granted in many states, neither in history nor in the developing world of today. This paper develops a framework where...

The economic literature on enforcement is generally pessimistic concerning the use of legal aid. In this Paper we show that legal aid can be part of optimal law enforcement. The rationale behind our result is that with legal aid, in a system with legal or judicial error, both guilty and innocent...

In cooperation with Lex Mundi member law firms in 109 countries, we measure and describe the exact procedures used by litigants and courts to evict a tenant for non-payment of rent and to collect a bounced check. We use these data to construct an index of procedural formalism of dispute...

I study data on bribes actually paid by individuals to public officials, viewing the results through a theoretical lens that considers the implications of trust networks. A bond of trust may permit an implicit quid pro quo to substitute for a bribe, which reduces corruption. Appropriate networks...

Two literatures in political economy argue that differences in political institutions help explain variation in the fiscal performance of countries. They indentify electoral systems and institutions that structure the formation of the budget as important determinants of the budget deficit. In...