Law and Justice Institutions play a key role for the development of the private sector and hence for economic growth and development. Better contract enforcement as well as improved access to justice for businesses are crucial elements of a strategy aiming at enhancing private sector development by reforming law and justice institutions.
Contract enforcement is crucially important for economic development. Exchange is what permits firms and individuals to specialize, and specialization, or the division of labor as Smith termed it in the Wealth of Nations, is the key to productivity and thus growth. Indeed, in his review of the causes of economic growth, Nobel Prize wining economist Douglass North identifies the lack of means for enforcing contracts as the single most important source of economic stagnation and underdevelopment. This paper prepared for a 2005 conference on “Reforming the Business Environment:
From Assessing Problems to Measuring Results” highlights what governments can do to facilitate the enforcement of contracts.
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