Formalizing Dispute Resolution: Effects of Village Courts in Bangladesh

Abstract Dispute resolution in low-income countries is typically done by either a costly and slow formal court or an informal institution without state-sanctioned enforcement powers. Can access to justice be increased by combining the best aspects of formal and informal institutions? We evaluate the effects of “Village Courts” (VCs) in rural Bangladesh using a large-scale field experiment. The introduction of VCs more than doubles the share of disputes resolved in state-sanctioned courts, but an informal institution called shalish remains dominant. There is some substitution from shalish to VCs, but congestion in higher-level courts, village social dynamics, and economic activity remain unaffected.