Choice of Law and Legal Evolution: Rethinking the Market for Legal Rules
University of Minnesota - Law School; University of Bologna
University of Bologna - Department of Economics
August 1, 2007
Minnesota Legal Studies Research Paper No. 07-38
Public Choice, Vol. 139, No. 3, pp. 461-492, 2009
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.
Number of Pages in PDF File: 43
Keywords: Choice of Law, Transnational Business Law, Legal Harmonization, Legal Competition, Network Effects
JEL Classification: K10, K33, D70
Date posted: September 3, 2007 ; Last revised: July 14, 2009
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