When Does Legal Origin Matter?
AbstractA vast literature documents better economic institutions in common law compared with civil law countries. The present paper argues that legal origin alone is insufficient to explain differences in the quality of economic institutions across countries. Rather, it is the interaction between legal origin and the quality of political institutions that is important. Empirical evidence from a cross-section of 90 countries on entry regulation, a measure of how business friendly economic institutions are towards firms, strongly supports our claim. For example, we find that the number of procedures required to start a business are lower in common law compared with civil law countries by 2.5 procedures or 24.3% of the sample mean. However, this difference varies sharply across the sample of countries with high and low levels of political accountability. It equals a large 3.4 procedures (37% of the sample mean) for the former and a mere 1.1 procedures (9.7% of the sample mean) for the latter. We conclude that legal origin matters for the quality of economic institutions but only when political accountability is high. We provide a plausible explanation for this phenomenon based on recent findings in the literature on political economy.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of California-Irvine, Department of Economics in its series Working Papers with number 080912.
Length: 41 pages
Date of creation: Dec 2008
Date of revision:
Legal origin; Regulation; Political institutions;
Find related papers by JEL classification:
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
- K2 - Law and Economics - - Regulation and Business Law
- P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
- P51 - Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-12-14 (All new papers)
- NEP-LAW-2008-12-14 (Law & Economics)
- NEP-POL-2008-12-14 (Positive Political Economics)
- NEP-REG-2008-12-14 (Regulation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2002.
"Law and finance : why does legal origin matter?,"
Policy Research Working Paper Series
2904, The World Bank.
- Beck, T.H.L. & Demirgüç-Kunt , A. & Levine, R., 2003. "Law and finance: Why does legal origin matter?," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125511, Tilburg University.
- Thorsten Beck & Asli Demirguc-Kunt & Ross Levine, 2002. "Law and Finance: why Does Legal Origin Matter?," NBER Working Papers 9379, National Bureau of Economic Research, Inc.
- Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, vol. 76(3), pages 399-457, June.
- David Stasavage, 2000. "Private Investment and Political Uncertainty," STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers 25, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Mulligan, Casey B. & Shleifer, Andrei, 2004.
"Population and Regulation,"
- Besley, Timothy J. & Prat, Andrea, 2002.
"Handcuffs for the Grabbing Hand? Media Capture and Government Accountability,"
CEPR Discussion Papers
3132, C.E.P.R. Discussion Papers.
- Timothy Besley & Andrea Prat, 2006. "Handcuffs for the Grabbing Hand? Media Capture and Government Accountability," American Economic Review, American Economic Association, vol. 96(3), pages 720-736, June.
- Timothy Besley & Andrea Prat, 2005. "Handcuffs for the Grabbing Hand? Media Capture and Government Accountability," STICERD - Political Economy and Public Policy Paper Series 07, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- repec:reg:rpubli:274 is not listed on IDEAS
- Daron Acemoglu & James A. Robinson, 2008.
"Persistence of Power, Elites, and Institutions,"
American Economic Review,
American Economic Association, vol. 98(1), pages 267-93, March.
- Daron Acemoglu & James A. Robinson, 2006. "Persistence of Power, Elites and Institutions," NBER Working Papers 12108, National Bureau of Economic Research, Inc.
- Acemoglu, Daron & Robinson, James A, 2006. "Persistence of Power, Elites and Institutions," CEPR Discussion Papers 5603, C.E.P.R. Discussion Papers.
- Gennaioli, Nicola & Shleifer, Andrei, 2007.
"The Evolution of Common Law,"
3451305, Harvard University Department of Economics.
- Dabla-Norris, Era & Gradstein, Mark & Inchauste, Gabriela, 2008.
"What causes firms to hide output? The determinants of informality,"
Journal of Development Economics,
Elsevier, vol. 85(1-2), pages 1-27, February.
- Gabriela Inchauste & Mark Gradstein & Era Dabla-Norris, 2005. "What Causes Firms to Hide Output? The Determinants of Informality," IMF Working Papers 05/160, International Monetary Fund.
- David Stasavage, 2002. "Private Investment and Political Institutions," Economics and Politics, Wiley Blackwell, vol. 14(1), pages 41-63.
- George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
- David Strömberg, 2004. "Radio's Impact on Public Spending," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 189-221, February.
- Thorsten Beck & Asli Demirgüç-Kunt & Vojislav Maksimovic, 2005. "Financial and Legal Constraints to Growth: Does Firm Size Matter?," Journal of Finance, American Finance Association, vol. 60(1), pages 137-177, 02.
- Beck, Thorsten & Clarke, George & Groff, Alberto & Keefer, Philip & Walsh, Patrick, 2000. "New tools and new tests in comparative political economy - the database of political institutions," Policy Research Working Paper Series 2283, The World Bank.
- Clarke, George R.G. & Cull, Robert & Martinez Peria, Maria Soledad, 2006. "Foreign bank participation and access to credit across firms in developing countries," Journal of Comparative Economics, Elsevier, vol. 34(4), pages 774-795, December.
- Gaoussou DIARRA & Sébastien MARCHAND, 2011.
"Does Pervasive Corruption Matter For Firm's Demand for Good Governance in Developing Countries?,"
- Gaoussou Diarra & Sébastien Marchand, 2011. "Does Pervasive Corruption Matter For Firm's Demand for Good Governance in Developing Countries?," Working Papers halshs-00588191, HAL.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jennifer dos Santos).
If references are entirely missing, you can add them using this form.