ABSTRACT. Trebilcock and Leng claim that, in transition economies, barter solves contract enforcement problems by providing deal-specific collateral for trade credits when firms face liquidity constraints. Nunn says that when relationship-specific investments are necessary for production, under-investment occurs if contracts cannot be enforced: the efficiency loss from under-investment will differ across industries depending on the importance of relationship-specific investments in the production process. Smits emphasizes that it seems impossible to calculate either the cost of legal diversity or the cost of uniform law, and that it seems wrong to link an increase of international contracting to uniform law.



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