Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/229278
Authors: 
Danquah, Michael
Sen, Kunal
Year of Publication: 
2020
Series/Report no.: 
WIDER Working Paper No. 2020/54
Abstract: 
In many low-income transition countries, where formal institutions such as courts do not function effectively, informal institutions are often used by firms to minimize transaction risks. We examine the role of informal institutions, in the forms of relational contracting and social networks, in determining the risks that firms are willing to bear in their transactions with their suppliers and customers, and whether firms that bear such risks have higher firm productivity. Our country context is Myanmar, a country which is making a transition from a socialist to marketoriented economy. Using an unique dataset of 2,496 micro, small, and medium firms, we find that firms that engage in risk taking are significantly more productive than firms that do not, and such firms are more likely to utilize informal institutions, such as acquiring information from informal interaction with customers, and social networks, including information received from business networks by firms, talking to other suppliers of customers, and being a member of a business association. Our findings suggest that informal institutions can be effective substitutes for formal institutions that are often absent or not effective in low-income transition economies.
Subjects: 
firm productivity
informal institutions
Myanmar
relational contracting
socialnetworks
transition economies
JEL: 
O12
O43
P26
Persistent Identifier of the first edition: 
ISBN: 
978-92-9256-811-5
Document Type: 
Working Paper

Files in This Item:
File
Size
856.51 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.