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Law and Finance "at the Origin"

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  • Ulrike Malmendier

Abstract

What are the key determinants of financial development and growth? A large literature debates the relative importance of countries' legal and political environment. In this paper, I present evidence from ancient Rome, where an early form of shareholder company, the societas publicanorum, developed. I show that the societas publicanorum flourished in a legally underdeveloped but politically supportive environment (Roman Republic) and disappeared when Roman law reached its height of legal sophistication but the political environment grew less supportive (Roman Empire). In the Roman case, legal development appears to have mattered little as long as the law as practiced was flexible and adapted to economic needs. The "law as practiced," in turn, reflected prevalent political interests. After discussing parallels in more recent history, I provide a brief overview of the literature on law and finance and on politics and finance. The historical evidence suggests that legal systems may be less of a technological constraint for growth than previously thought -- at least "at the origin." (JEL D72, K10, N23, N43)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jel.47.4.1076
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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Literature.

Volume (Year): 47 (2009)
Issue (Month): 4 (December)
Pages: 1076-1108

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Handle: RePEc:aea:jeclit:v:47:y:2009:i:4:p:1076-1108

Note: DOI: 10.1257/jel.47.4.1076
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  1. Marco Pagano & Paolo Volpin, 2006. "Alfred Marshall Lecture Shareholder Protection, Stock Market Development, and Politics," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 315-341, 04-05.
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Cited by:
  1. Beck, T.H.L., 2011. "The Role of Finance in Economic Development: Benefits, Risks, and Politics," Discussion Paper 2011-141, Tilburg University, Center for Economic Research.
  2. Andrew Ellul & Marco Pagano & Fausto PAnunzi, 2008. "Inheritance Law and Investment in Family Firms," CSEF Working Papers 204, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 30 Nov 2009.
  3. Stelios Michalopoulos & Luc Laeven & Ross Levine, 2011. "Financial Innovation and Endogenous Growth," Economics Working Papers 0097, Institute for Advanced Study, School of Social Science.
  4. Ross Levine & Yona Rubinstein, 2013. "Smart and Illicit: Who Becomes an Entrepreneur and Does it Pay?," CEP Discussion Papers dp1237, Centre for Economic Performance, LSE.
  5. Bernardo Guimaraes & Kevin D. Sheedy, 2012. "A Model of Equilibrium Institutions," CEP Discussion Papers dp1123, Centre for Economic Performance, LSE.
  6. Beck, Thorsten & Feyen, Erik, 2013. "Benchmarking financial systems : introducing the financial possibility frontier," Policy Research Working Paper Series 6615, The World Bank.
  7. Daniel Berkowitz & Mark Hoekstra & Koen Schoors, 2012. "Does Finance Cause Growth? Evidence from the Origins of Banking in Russia," NBER Working Papers 18139, National Bureau of Economic Research, Inc.
  8. repec:dgr:uvatin:2013034 is not listed on IDEAS

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