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Law, finance, economic growth and welfare: why does legal origin matter?

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  • Asongu Simplice

    ()
    (Yaoundé/Cameroun)

Abstract

This paper proposes and empirically validates four theories of why legal origin influences growth and welfare through finance. It is a natural extension of “Law and finance: why does legal origin matter?” by Thorsten Beck, Asli Demirgüç-Kunt and Ross Levine (2003). We find only partial support for the Mundell (1972), La Porta et al. (1998) and Beck et al. (2003) hypotheses that English common-law countries tend to have better developed financial intermediaries than French civil-law countries. While countries with English legal tradition have legal systems that improve financial depth, activity and size, countries with French legal origin overwhelmingly dominate in financial intermediary allocation efficiency. Countries with Portuguese legal origin fall in-between.

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File URL: http://www.afridev.org/RePEc/agd/agd-wpaper/Law-finance-economic-growth-and-welfare.-Why-does-legal-origin-matter.pdf
File Function: Revised version, 2013
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Bibliographic Info

Paper provided by African Governance and Development Institute. in its series Working Papers with number 11/007.

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Length: 26
Date of creation: 18 Aug 2011
Date of revision:
Publication status: Forthcoming in Institutions and Economies
Handle: RePEc:agd:wpaper:11/007

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Keywords: Law; Financial development; Growth; Welfare;

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References

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  1. J.A. Agbor & J. W. Fedderke & N. Viegi, 2010. "How Does Colonial Origin Matter for Economic Performance in sub-Saharan Africa?," Working Papers, Economic Research Southern Africa 176, Economic Research Southern Africa.
  2. Raghuram G. Rajan & Luigi Zingales, 1996. "Financial Dependence and Growth," NBER Working Papers 5758, National Bureau of Economic Research, Inc.
  3. Daniel Berkowitz & Katharina Pistor & Jean-Francois Richard, 2000. "Economic Development, Legality, and the Transplant Effect," CID Working Papers, Center for International Development at Harvard University 39, Center for International Development at Harvard University.
  4. Asongu Simplice, 2012. "African Financial Development Dynamics: Big Time Convergence," Working Papers, African Governance and Development Institute. 12/003, African Governance and Development Institute..
  5. Beck, Thorsten & Levine, Ross, 2002. "Industry growth and capital allocation:*1: does having a market- or bank-based system matter?," Journal of Financial Economics, Elsevier, Elsevier, vol. 64(2), pages 147-180, May.
  6. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series, The World Bank 1083, The World Bank.
  7. Ross Levine & Sara Zervos, . "Stock markets, banks and economic growth ," CERF Discussion Paper Series, Economics and Finance Section, School of Social Sciences, Brunel University 95-11, Economics and Finance Section, School of Social Sciences, Brunel University.
  8. Simplice A. Asongu, 2013. "Real and monetary policy convergence: EMU crisis to the CFA zone," Journal of Financial Economic Policy, Emerald Group Publishing, Emerald Group Publishing, vol. 5(1), pages 20-38, February.
  9. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
  10. Simplice A, Asongu, 2012. "Fighting consumer price inflation in Africa. What do dynamics in money, credit, efficiency and size tell us?," MPRA Paper 41553, University Library of Munich, Germany.
  11. Simplice A., Simplice, 2011. "Why do French civil-law countries have higher levels of financial efficiency?," MPRA Paper 33950, University Library of Munich, Germany.
  12. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 15(1), pages 222-79, April.
  13. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2002. "Law and finance : why does legal origin matter?," Policy Research Working Paper Series, The World Bank 2904, The World Bank.
  14. Jayaratne, Jith & Strahan, Philip E, 1996. "The Finance-Growth Nexus: Evidence from Bank Branch Deregulation," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 111(3), pages 639-70, August.
  15. Franklin Allen & Jun Qian & Meijun Qian, 2002. "Law, Finance, and Economic Growth in China," Center for Financial Institutions Working Papers, Wharton School Center for Financial Institutions, University of Pennsylvania 02-44, Wharton School Center for Financial Institutions, University of Pennsylvania.
  16. Rajan, Raghuram G. & Zingales, Luigi, 2003. "The great reversals: the politics of financial development in the twentieth century," Journal of Financial Economics, Elsevier, Elsevier, vol. 69(1), pages 5-50, July.
  17. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 2000. "Investor protection and corporate governance," Journal of Financial Economics, Elsevier, Elsevier, vol. 58(1-2), pages 3-27.
  18. Beck, T.H.L. & Demirgüç-Kunt, A. & Levine, R., 2000. "A new database on financial development and structure," Open Access publications from Tilburg University, Tilburg University urn:nbn:nl:ui:12-3125518, Tilburg University.
  19. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series, The World Bank 1083, The World Bank.
  20. Simplice A, Asongu, 2012. "Are Proposed African Monetary Unions Optimal Currency Areas? Real, Monetary and Fiscal Policy Convergence Analysis," MPRA Paper 41552, University Library of Munich, Germany.
  21. Asli Demirgüç-Kunt & Vojislav Maksimovic, 1998. "Law, Finance, and Firm Growth," Journal of Finance, American Finance Association, American Finance Association, vol. 53(6), pages 2107-2137, December.
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