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Legal Regime and Business's Organizational Choice: A Comparison of France and the United States

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  • Naomi R. Lamoreaux
  • Jean-Laurent Rosenthal
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    Abstract

    In a recent series of articles, Rafael La Porta, Florencio Lopez-de-Silanes, Andrei Shleifer, and Robert W. Vishny have argued that countries whose legal systems are based on civil law (especially of French origin) have systematically weaker environments for business than those whose legal systems are based on Anglo-American common law. This paper addresses that argument by exploring the responsiveness of French and U.S. law to the needs of business enterprises during the nineteenth century, when both countries were undergoing industrialization. We find that contracting environment in the U.S. was in fact neither freer nor more flexible than that in France during this critical period. Not only did U.S. law offer enterprises a more limited menu of organizational choices, but business people in the U.S. had much less ability to adapt the basic forms to meet their needs than their French counterparts. Nor is there any evidence that American law evolved more readily in response to economic change than French law. In both nations, major changes in the rules governing organizational forms required the passage of new statutes, and governmental institutions do not seem to have worked any more expeditiously in the U.S. than in France to improve the menu of choices. To the contrary, it was not until the late twentieth century that U.S. business obtained much the same degree of contractual freedom that their French counterparts had long taken for granted.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10288.

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    Date of creation: Feb 2004
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    Publication status: published as Lamoreaux, Naomi R., and Jean-Laurent Rosenthal. 2005. "Legal Regime and Business's Organizational Choice: A Comparison of France and the United States During the Era of Industrialization," American Law and Economics Review, 7(1), 28-61.
    Handle: RePEc:nbr:nberwo:10288

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    1. Levine, Ross & Loayza, Norman & Beck, Thorsten, 1999. "Financial intermediation and growth : Causality and causes," Policy Research Working Paper Series, The World Bank 2059, The World Bank.
    2. Mahoney, Paul G, 2001. "The Common Law and Economic Growth: Hayek Might Be Right," The Journal of Legal Studies, University of Chicago Press, University of Chicago Press, vol. 30(2), pages 503-25, Part I Ju.
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    4. North, Douglass C. & Weingast, Barry R., 1989. "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History, Cambridge University Press, Cambridge University Press, vol. 49(04), pages 803-832, December.
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    6. Thorsten Beck & Ross Levine, 2003. "Legal Institutions and Financial Development," NBER Working Papers 10126, National Bureau of Economic Research, Inc.
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    9. Beck, T.H.L. & Demirgüç-Kunt , A. & Levine, R., 2003. "Law and finance: Why does legal origin matter?," Open Access publications from Tilburg University, Tilburg University urn:nbn:nl:ui:12-3125511, Tilburg University.
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    Cited by:
    1. Luca Anderlini & Leonardo Felli & Alessandro Riboni, 2008. "Statute Law or Case Law?," STICERD - Theoretical Economics Paper Series, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE /2008/528, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    2. Kathy Fogel & Randall Morck & Bernard Yeung, 2006. "Big Business Stability and Economic Growth: Is What's Good for General Motors Good for America?," NBER Working Papers 12394, National Bureau of Economic Research, Inc.
    3. Pagano, Marco & Volpin, Paolo, 2005. "Shareholder Protection, Stock Market Development and Politics," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5378, C.E.P.R. Discussion Papers.
    4. Bordo, Michael D. & Rousseau, Peter L., 2006. "Legal-political factors and the historical evolution of the finance-growth link," European Review of Economic History, Cambridge University Press, Cambridge University Press, vol. 10(03), pages 421-444, December.
    5. Ruan, Jianqing & Zhang, Xiaobo, 2008. "Finance and cluster-based industrial development in China:," IFPRI discussion papers, International Food Policy Research Institute (IFPRI) 768, International Food Policy Research Institute (IFPRI).
    6. John Joseph Wallis, 2004. "The Concept of Systematic Corruption in American Political and Economic History," NBER Working Papers 10952, National Bureau of Economic Research, Inc.
    7. Marco Pagano & Paolo F. Volpin, 2005. "The Political Economy of Corporate Governance," American Economic Review, American Economic Association, American Economic Association, vol. 95(4), pages 1005-1030, September.
    8. Douglass C North & John Joseph Wallis & Barry R. Weingast, 2006. "A Conceptual Framework for Interpreting Recorded Human History," NBER Working Papers 12795, National Bureau of Economic Research, Inc.
    9. John Joseph Wallis, 2006. "The Concept of Systematic Corruption in American History," NBER Chapters, National Bureau of Economic Research, Inc, in: Corruption and Reform: Lessons from America's Economic History, pages 23-62 National Bureau of Economic Research, Inc.
    10. John Joseph Wallis, 2004. "Constitutions, Corporations, and Corruption: American States and Constitutional Change," NBER Working Papers 10451, National Bureau of Economic Research, Inc.

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