Timothy Frye, Columbia University
AbstractMost strategies of strengthening property rights focus on public institutions, such as courts and bailiffs. However, private institutions, networks of reputation, and social organizations also play a key role in shaping the quality of property rights. This essay explores the interplay of public and private institutions in promoting trade between firms in Russia. Survey-based experiments of 500 businesspeople conducted in Russia in 2008 find that a good reputation provides a more potent stimulus to trade than does a 15 percent discount in price; that reputation and state-run courts each promote trade; and that reputation and courts are complements rather than substitutes, that is, reputation provides a stronger boost to trade when courts work well and vice versa. Rather than undermining public institutions, private institutions in this case underpin them. The paper concludes by drawing policy implications from the findings.