Skip to main content

Contract-Intensive Money: Contract Enforcement, Property Rights, and Economic Performance

Abstract

We introduce a new, easily accessed and objective measure of the enforceability of contracts and the security of property rights. This measure, called “contract-intensive money” or CIM, is based on citizens’ decisions regarding the form in which they choose to hold their financial assets. Country case studies show that CIM varies over time in response to political events in ways predicted by our arguments. We also show that CIM is positively related to investment and growth rates, and to the relative size of contract-dependent sectors of the economy.

This is a preview of subscription content, access via your institution.

References

  1. Barro, Robert J. (1991). “Economic Growth in a Cross-Section of Countries, ” Quarterly Journal of Economics106, 407–443.

    Google Scholar 

  2. Barro, Robert J., and Jong-Wha Lee. (1993). “International Comparisons of Educational Attainment, ” Journal of Monetary Economics32, 363–394.

    Google Scholar 

  3. Borner, S., A. Brunetti, and B. Weder. (1995). Political Credibility and Economic Development. New York: St. Martin's Press.

    Google Scholar 

  4. Bruno, Michael, and William Easterly. (1998). “Inflation Crises and Long-Run Growth, ” Journal of Monetary Economics41, 3–26.

    Google Scholar 

  5. Clague, Christopher, Philip Keefer, Stephen Knack, and Mancur Olson. (1996). “Property and Contract Rights in Autocracies and Democracies, ” Journal of Economic Growth1, 243–276.

    Google Scholar 

  6. Cukierman, Alex, and Steven Webb. (1995). “Political Influence on the Central Bank: International Evidence, ” World Bank Economic Review9, 397–423.

    Google Scholar 

  7. DeLong, J. Bradford, and Larry Summers. (1991). “Equipment Investment and Economic Growth, ” Quarterly Journal of Economics106, 445–502.

    Google Scholar 

  8. Easterly, William. (1993). “How Much Do Distortions Affect Growth?” Journal of Monetary Economics32, 187–212.

    Google Scholar 

  9. The Europa World Yearbook. (various years). London: Europa Publications.

  10. Galor, Oded, and J. Zeira. (1993). “Income Distribution and Macroeconomics, ” Review of Economic Studies60, 35–52.

    Google Scholar 

  11. Gastil, Raymond D. (various years). Freedom in the World. Westport, Conn.: Greenwood.

  12. Grierson, P. J. H. (1904). The Silent Trade. Edinburgh: William Green.

    Google Scholar 

  13. Gurr, Ted Robert. (1990). Polity II: Political Structures and Regime Change: 1800–1986. Ann Arbor, MI: Inter-University Consortium for Political and Social Research.

    Google Scholar 

  14. Haggard, Stephan, and Robert R. Kaufman. (1992). The Politics of Economic Adjustment: International Constraints, Distributive Conflicts, and the State. Princeton, NJ: Princeton University Press.

    Google Scholar 

  15. Hall, Robert, and Charles Jones. (1996). “The Productivity of Nations. ” NBER Working Paper No. 5812.

  16. Hayek, Friedrich A. (1948). “The Meaning of Competition. ” In Friedrich A. Hayek (ed.), Individualism and Economic Order(pp. 92–106). Chicago: University of Chicago Press.

    Google Scholar 

  17. International Monetary Fund. (various issues). International Financial Statistics Yearbook.

  18. Hobbes, Thomas. (1958 [1651]). Leviathan. Indianapolis, IN: Bobbs-Merrill.

    Google Scholar 

  19. King, Robert G., and Ross Levine. (1993a). “Finance and Growth: Schumpeter Might Be Right, ” Quarterly Journal of Economics108, 717–737.

    Google Scholar 

  20. King, Robert G., and Ross Levine. (1993b). “Finance, Entrepreneurship and Growth, ” Journal of Monetary Economics32, 513–542.

    Google Scholar 

  21. Knack, Stephen, and Philip Keefer. (1995). “Institutions and Economic Performance: Cross-Country Tests Using Alternative Institutional Measures, ” Economics and Politics7, 207–227.

    Google Scholar 

  22. Knack, Stephen, and Philip Keefer. (1997). “Does Social Capital Have an Economic Payoff?” Quarterly Journal of Economics112, 1251–1288.

    Google Scholar 

  23. Kobrin, Stephen J. (1985). “Expropriation as an Attempt to Control Foreign Forms in Developing Countries. ” In T. Brewer (ed), Political Risks in International Business. New York: Praeger.

    Google Scholar 

  24. La Porta, Rafael, Florencio Lopez-de-Silanes, Andrei Shleifer, and Robert W. Vishny. (1998). “Lawand Finance, ” Journal of Political Economy106, 1113–1155.

    Google Scholar 

  25. Levine, Ross. (1997). “Financial Development and Economic Growth: Views and an Agenda, ” Journal of Economic Literature35, 688–726.

    Google Scholar 

  26. Levine, Ross. (1998). “The Legal Environment, Banks, and Long-Run Economic Growth, ” Journal of Money, Credit, and Banking30, 596–613.

    Google Scholar 

  27. Levine, Ross, and David Renelt. (1992). “ASensitivity Analysis of Cross-Country Growth Regression, ” American Economic Review82, 942–963.

    Google Scholar 

  28. Mauro, Paolo. (1995). “Corruption and Growth, ” Quarterly Journal of Economics110, 681–712.

    Google Scholar 

  29. North, Douglass C. (1990). Institutions, Institutional Change, and Economic Performance. Cambridge: Cambridge University Press.

    Google Scholar 

  30. Olson, Mancur. (1992). “The Hidden Path to a Successful Economy. ” In Christopher Clague and Gordon Rausser (eds), The Emergence of Market Economies in Eastern Europe(pp. 55–76). Cambridge, MA: Blackwell.

    Google Scholar 

  31. Olson, Mancur. (1993). “Dictatorship, Democracy and Development, ” American Political Science Review87, 567–576.

    Google Scholar 

  32. Olson, Mancur. (1996). “Big Bills Left on the Sidewalk: Why Some Nations Are Rich, and Others Poor, ” Journal of Economic Perspectives10, 3–24.

    Google Scholar 

  33. Pritchett, Lant. (1996). “Where Has All the Education Gone?” Policy Research Working Paper No. 1581, World Bank.

  34. Rosenberg, Nathan, and L. E. Birdzell. (1986). How the West Grew Rich: The Economic Transformation of the Industrial World. New York: Basic Books.

    Google Scholar 

  35. Scully, Gerald W. (1988). “The Institutional Framework and Economic Development, ” Journal of Political Economy96, 652–662.

    Google Scholar 

  36. Sullivan, Michael J. (1991). Measuring Global Values. New York: Greenwood.

    Google Scholar 

  37. Summers, Robert, and Alan Heston. (1991). “The PennWorld Table (Mark V): An Expanded Set of International Comparisons, 1950–88, ” Quarterly Journal of Economics106, 327–368.

    Google Scholar 

  38. Townsend, Robert M. (1983). “Financial Structure and Economic Activity, ” American Economic Review73, 895–911.

    Google Scholar 

  39. Williamson, Oliver. (1983). “Credible Commitments: Using Hostages to Support Exchange, ” American Economic Review73, 519–540.

    Google Scholar 

  40. Williamson, Oliver. (1985). The Economic Institutions of Capitalism. New York: Free Press.

    Google Scholar 

  41. Wright, Lindsay M. (1982). “A Comparative Survey of Economic Freedoms. ” In Raymond Gastil (ed), Freedom in the World, 1982. Westport, Conn.: Greenwood.

    Google Scholar 

Download references

Author information

Affiliations

Authors

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Clague, C., Keefer, P., Knack, S. et al. Contract-Intensive Money: Contract Enforcement, Property Rights, and Economic Performance. Journal of Economic Growth 4, 185–211 (1999). https://doi.org/10.1023/A:1009854405184

Download citation

  • contract enforcement
  • property rights
  • governance
  • economic growth