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

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  • Simplice A., Asongu

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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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 33868.

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Date of creation: 18 Aug 2011
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Handle: RePEc:pra:mprapa:33868

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Keywords: Law; Financial development; Growth; Welfare;

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  1. repec:fth:wobaco:1083 is not listed on IDEAS
  2. Simplice A., Simplice, 2011. "Why do French civil-law countries have higher levels of financial efficiency?," MPRA Paper 33950, University Library of Munich, Germany.
  3. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," NBER Working Papers 5661, National Bureau of Economic Research, Inc.
  4. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, . "The Quality of Government," Working Paper 19452, Harvard University OpenScholar.
  5. Asongu Simplice, 2012. "Real and Monetary Policy Convergence: EMU Crisis to the CFA Zone," Working Papers 12/033, African Governance and Development Institute..
  6. Ross Levine & Sara Zervos, . "Stock markets, banks and economic growth ," CERF Discussion Paper Series 95-11, Economics and Finance Section, School of Social Sciences, Brunel University.
  7. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2003. "Law and finance: why does legal origin matter?," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 653-675, December.
  8. Simplice A, Asongu, 2012. "African Financial Development Dynamics: Big Time Convergence," MPRA Paper 36053, University Library of Munich, Germany.
  9. La Porta, Rafael & Lopez-de-Silanes, Florencio & Schleifer, Andrei & Vishny, Robert, 2001. "Investor Protection and Corporate Governance," Working Paper Series rwp01-017, Harvard University, John F. Kennedy School of Government.
  10. Franklin Allen & Jun Qian & Meijun Qian, 2002. "Law, Finance, and Economic Growth in China," Center for Financial Institutions Working Papers 02-44, Wharton School Center for Financial Institutions, University of Pennsylvania.
  11. Jayaratne, Jith & Strahan, Philip E, 1996. "The Finance-Growth Nexus: Evidence from Bank Branch Deregulation," The Quarterly Journal of Economics, MIT Press, vol. 111(3), pages 639-70, August.
  12. Rajan, Raghuram G. & Zingales, Luigi, 2003. "The great reversals: the politics of financial development in the twentieth century," Journal of Financial Economics, Elsevier, vol. 69(1), pages 5-50, July.
  13. Raghuram G. Rajan & Luigi Zingales, 1996. "Financial Dependence and Growth," NBER Working Papers 5758, National Bureau of Economic Research, Inc.
  14. Daniel Berkowitz & Katharina Pistor & Jean-Francois Richard, 2000. "Economic Development, Legality, and the Transplant Effect," William Davidson Institute Working Papers Series 308, William Davidson Institute at the University of Michigan.
  15. Asli Demirgüç-Kunt & Vojislav Maksimovic, 1998. "Law, Finance, and Firm Growth," Journal of Finance, American Finance Association, vol. 53(6), pages 2107-2137, December.
  16. 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.
  17. Julius A. Agbor, 2011. "How Does Colonial Origin Matter for Economic Performance in Sub-Saharan Africa?," Working Paper Series UNU-WIDER Working Paper W, World Institute for Development Economic Research (UNU-WIDER).
  18. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
  19. Beck, T.H.L. & Levine, R., 2002. "Industry growth and capital allocation: Does having a market- or bank-based system matter?," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125514, Tilburg University.
  20. 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.
  21. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 1999. "A new database on financial development and structure," Policy Research Working Paper Series 2146, The World Bank.
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