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Do legal origins matter? The case of bankruptcy laws in Europe 1808–1914

  • Jérôme Sgard
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    Since the early 1997 paper by La Porta et al., a growing body of research has argued that ‘legal origins’ have a country-specific, time-invariant effect on property rights and economic development. Following the methodology of La Porta et al., an original database of 51 bankruptcy laws has been built: it ranges over 15 European countries and more than a hundred years (1808–1914), and summarises how the rights and incentives of the parties were defined as the procedures unfolded. The first conclusion is that, over the entire period, all legal traditions strongly protected creditors' rights; only English law comes out prima facie as less protective. Second, evidence suggests that the evolution of these laws was influenced less by their past than by continent-wide trends, arguably linked to capitalist development. An early nineteenth century model thus saw heavy repression of failed debtors and highly regulated judicial procedures. After a transition period from the late 1860s to the late 1880s, prison for debt was abandoned, rehabilitation became easier, and the parties were given much more room to recontract on property rights.

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    File URL: http://spire.sciencespo.fr/hdl:/2441/6824/resources/sgard-ereh-2006.pdf
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    Paper provided by Sciences Po in its series Sciences Po publications with number info:hdl:2441/6824.

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    Date of creation: Dec 2006
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    Publication status: Published in European Review of Economic History, 2006, pp.389-419
    Handle: RePEc:spo:wpmain:info:hdl:2441/6824
    Contact details of provider: Web page: http://www.sciencespo.fr/

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    1. Edward L. Glaeser & Andrei Shleifer, 2001. "Legal Origins," Harvard Institute of Economic Research Working Papers 1920, Harvard - Institute of Economic Research.
    2. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, . "The Quality of Government," Working Paper 19452, Harvard University OpenScholar.
    3. Ross Levine, 1998. "The legal environment, banks, and long-run economic growth," Proceedings, Federal Reserve Bank of Cleveland, issue Aug, pages 596-620.
    4. Michael Graff, 2005. "Law and Finance: Common-law and Civil-law Countries Compared," KOF Working papers 05-99, KOF Swiss Economic Institute, ETH Zurich.
    5. Marco Pagano & Paolo Volpin, 2001. "The Political Economy of Finance," Oxford Review of Economic Policy, Oxford University Press, vol. 17(4), pages 502-519.
    6. Daniel Berkowitz & Katharina Pistor & Jean-Francois Richard, 2000. "Economic Development, Legality, and the Transplant Effect," CID Working Papers 39, Center for International Development at Harvard University.
    7. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 1998. "Corporate Ownership Around the World," Harvard Institute of Economic Research Working Papers 1840, Harvard - Institute of Economic Research.
    8. 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.
    9. Lester, V. Markham, 1995. "Victorian Insolvency: Bankruptcy, Imprisonment for Debt, and Company Winding-up in Nineteenth-Century England," OUP Catalogue, Oxford University Press, number 9780198205180, March.
    10. Djankov, Simeon & La Porta, Rafael & López-de-Silanes, Florencio & Shleifer, Andrei, 2002. "Courts: The Lex Mundi project," CEPR Discussion Papers 3344, C.E.P.R. Discussion Papers.
    11. Kazunari Ohashi & Manmohan Singh, 2004. "Japan's Distressed Debt Market," IMF Working Papers 04/86, International Monetary Fund.
    12. Alston, Lee J, 1984. "Farm Foreclosure Moratorium Legislation: A Lesson from the Past," American Economic Review, American Economic Association, vol. 74(3), pages 445-57, June.
    13. Martin, Albro, 1974. "Railroads and the Equity Receivership: An Essay on Institutional Change," The Journal of Economic History, Cambridge University Press, vol. 34(03), pages 685-709, September.
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