Contract Enforcement and Investment: A Systematic Review of the Evidence

This “systematic review” focuses on the empirical research that evaluates the causal link between contract enforcement and investment. The evidence available in a variety of academic media, reviewed with established procedures, provides some but weak support for the existence of such link. During 1990-2010 we only found 19 independent studies that empirically test the relationship, and only one that directly examines the effects of an actual institutional reform. Few of the studies test alternative explanations, perform robustness checks, or critically assess the findings. In sum, the broadly accepted hypothesis of direct causation is still awaiting strong empirical backing.