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Fall 2008

ISSN 0890-913X

Volume 24, Number 1

Categories: Law | Fall 2008

Remittances and Reputations in Hawala Money- Transfer Systems: Self-Enforcing Exchange on an International Scale

Emily C. Schaeffer, George Mason University

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TheJournalofPrivateEnterprise24(1),2008,95-117RemittancesandReputationsinHawalaMoney-TransferSystems:Self-EnforcingExchangeonanInternationalScaleEmilyC.Schaeffer∗GeorgeMasonUniversityAbstractMigrantworkerremittancesoftentakeplaceoutsidethescopeofgovernmentenforcement.Throughanexaminationoftheinformalremittancetransfersystemofhawala,thispaperarguesthatself-enforcingexchangemechanismscansupporthighvolumetradeintheabsenceofformalcontractenforcement.Hawalanetworksemployexpostreputationmechanismsbetweenagentsandexantesignalingtoupholdobligationsunderconditionsofcontractuncertainty.JELCodes:D85,F33,G29,N25,P48,Z13Keywords:Hawala,Self-enforcement,Remittances,NetworksI.IntroductionTradeflourisheswhenindividualshaveconfidencethatothermembersofsocietywillhonorandenforceobligationsandpromises.Incountrieswheretheruleoflawisthemodusoperandi,contractlawservestoprovideconfidencebyconstrainingtraders,enforcingbreaches,andloweringtransactioncosts.However,whenthemachineryoflawisnotformallypresent,privatearrangementsoftenemergetomitigateconflictandsupportcooperation.Onefindsexamplesofefficientprivateenforcementinstitutionsthroughouthistoryandwithinthecontextofinternationaltrade(Landa,1981;Bernstein,1992;Grief,1993;Stringham,2003,2004;Leeson,2006).Inlieuofstateenforcement,privatearrangementsrelyonalternativemechanismstosustaincooperation.∗TheauthorwishestothankPeterBoettke,PeterLeeson,FredSautet,VirgilStorr,andseminarparticipantsatGeorgeMasonUniversityandtheMercatusCenterforhelpfulcomments.Thispaperalsobenefitedfromthesuggestionsoftwoanonymousreferees.Theusualdisclaimerapplies.95

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Title	Remittances and Reputations in Hawala Money- Transfer Systems: Self-Enforcing Exchange on an International Scale
Authors/Creators:	Emily C. Schaeffer, George Mason University
Year:	2008
Volume:	24
Number:	1
Pages:	95 - 117
Publisher:	The Association of Private Enterprise Education
ISSN:	0890-913X
Document Type:	Articles
Keywords:	Contracts, Law Enforcement, Hawala , Networks, Remittances, Self-enforcement

Citation:
Schaeffer, Emily C. / 2008. "Remittances and Reputations in Hawala Money- Transfer Systems: Self-Enforcing Exchange on an International Scale." The Journal of Private Enterprise, 24(1): 95-117.