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Choice of Law and Legal Evolution: Rethinking the Market for Legal Rules

Francesco Parisi
University of Minnesota - Law School

Emanuela Carbonara
University of Bologna - Department of Economics

Minnesota Legal Studies Research Paper No. 07-38
Public Choice, Vol. 139, No. 3, pp. 461-492, 2009

Abstract:
We consider the impact of different choice-of-law regimes on the evolution of formal law. We follow an evolutionary approach to explain possible patterns of legal harmonization and competition. Some of them predict the universal diffusion of a single rule, even though not necessarily efficient. Permissive choice-of-law may lead countries to keep inefficient legal rules and firms to opt out of domestic law, leading to a dichotomy between the rules existing in the books and those utilized in commercial relationships. The emergence of such lex mercatoria may further undermine the legislative incentives to switch to more efficient rules.

Keywords: Choice of Law, Transnational Business Law, Legal Harmonization, Legal Competition, Network Effects

JEL Classifications: K10, K33, D70

Accepted Paper Series

Date posted: September 03, 2007 ; Last revised: July 14, 2009

Suggested Citation

Parisi, Francesco and Carbonara, Emanuela, Choice of Law and Legal Evolution: Rethinking the Market for Legal Rules (August 1, 2007). Minnesota Legal Studies Research Paper No. 07-38; Public Choice, Vol. 139, No. 3, pp. 461-492, 2009. Available at SSRN: http://ssrn.com/abstract=1011376

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Contact Information

Francesco Parisi (Contact Author) University of Minnesota - Law School ( email ) 229 19th Avenue South Minneapolis, MN 55455 United States
Emanuela Carbonara University of Bologna - Department of Economics ( email ) Piazza Scaravilli 2 Bologna 40126 Italy +39 051 2098149 (Phone) +39 051 2098040 (Fax)