书面合同有效吗？ Lessons from a Field Experiment in Malawi

By Laura Aquino

Imagine you need to print your thesis or dissertation. You go to a print shop near Boston University, leave your manuscript and prepare to collect it in a couple of days. What would happen if, when collecting your thesis, you find that some pages were printed incorrectly? Would you have to pay again for a new printing job or should the shop print your work again at no cost?

At a print shop in Boston, a customer would receive a receipt, invoice or other kind of written confirmation as proof of purchase for a high-quality job. Some of these written forms explicitly establish that the print shop will print your job again if something goes wrong. Although this may sound like standard practice worldwide, it is not. 

In many low- and middle-income countries, transactions between customers and businesses are often conducted informally, and the dilemma described above does not have an easy solution in these contexts. In such informal settings, shops generally do not provide receipts, invoices or other documentation as proof of agreement.

Business transactions can be small, medium or large, but the mechanism behind them is essentially the same. Contracts are relationships where two parties agree to work together. They hold both sides accountable for the terms set at the beginning of the relationship. More specifically, written contracts are the visual representation of that relationship and serve as tangible proof that holds each party to their original agreement.

Researchers affiliated with the Human Capital Initiative are currently implementing a field experiment in urban Malawi to test the relative effects of introducing and enforcing written contracts on compliance and service quality outcomes. The study focuses on the printing industry in Malawi, as it is an industry where formal contracting is scarce, but it is relatively easy to assess the quality of the finished product. 

The study aims to better understand settings where contracts are conducted informally, and businesses do not provide written documentation proving agreement within the transaction. In these settings, introducing a written contract could settle disputes over transactions between buyers and sellers and limit the uncertainty of transaction outcomes. Nonetheless, non-written or verbal agreements are also beneficial because they allow room for price negotiations and flexible terms and conditions. 

The HCI study involves 160 print shops, kiosks and firms in Lilongwe, Malawi. We are particularly interested in testing the extent to which introducing certain imposing conditions along with a formal contract impacts firm performance. First, we want to understand whether written contracts impact quality in the printing industry in Lilongwe. Second, we want to understand the conditions under which written contracts may help increase output quality. In particular, we will test whether introducing a written agreement with explicit penalties adds an extra incentive to deliver high-quality goods.

Print shops in the study were randomized into three groups. The first group of shops will receive some print orders without a written contract, with all instructions given orally. The second group will receive precisely the same order as the first group; however, a written agreement with the shop will be signed, specifying the number of copies to be made, a description of the expected quality, a deadline and the price to be paid if the contract is respected. Finally, a third group will receive the same order, but this contract will explicitly impose a penalty if the print shop does not follow the agreement. 

With the results, we will be able to compare quality outcomes between the three groups and understand whether a written contract enhances the quality of service and outcomes. For example, some shops using a written contract tend to be more realistic and transparent about the time needed to print the order. On the other hand, it could be that a written agreement in this context makes outcomes worse. For instance, some shops tend to put less effort into work if they feel a written contract implies distrust in their business. 

The results will help identify if and how contracting may improve transparency and accountability, which in turn may positively affect productivity, quality and output. It will also be particularly interesting to see how and to what extent the use of a written contract in a sector where the common rule is to avoid written agreements affects business relationships. Furthermore, these findings may motivate the use of contracts in sectors where informal agreements are still the norm (e.g., health, agriculture, education and public services). 

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Laura Aquino is a Research Assistant with the Human Capital Initiative at the Boston University Global Development Policy Center and a PhD Candidate in Economics at Boston University.