The Guarantees of Freedom
Rafael La Porta
Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)
Florencio Lopez de Silanes
EDHEC Business School; National Bureau of Economic Research (NBER); Tinbergen Institute
Columbia University - School of International & Public Affairs (SIPA)
Harvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)
Harvard Institute of Economic Research Paper No. 1943
Hayek (1960) distinguishes the institutions of English freedom, which guarantee the independence of judges from political interference in the administration of justice, from those of American freedom, which allow judges to restrain law-making powers of the sovereign through constitutional review. We create a data base of constitutional rules in 71 countries that reflect these institutions of English and American freedom, and ask whether these rules predict economic and political freedom in a cross-section of countries. We find that the English institutions of judicial independence are strong predictors of economic freedom and weaker predictors of political freedom. The American institutions of checks and balances are strong predictors of political but not of economic freedom. Judicial independence explains half of the positive effect of common law legal origin on measures of economic freedom.
Number of Pages in PDF File: 55
JEL Classification: K00, N40, P10working papers series
Date posted: January 23, 2002
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