Identifying the Virtues of the Common Law

Abstract:     
This article explores the claims that a nation's reliance on common law processes produces better economic results. This position has seen considerable empirical support, but it remains underspecified. There is no single explanation for why the common law should be superior, and the article begins by considering the competing theories, which I call the bottom-up efficiency theory, the interest group theory, the liberty theory, and the stability theory. Then I test each theory in cross-national regressions using intermediate variables such as contract-intensive money and corruption. These analyses demonstrate a statistically significant effect for the common law on two variables - legal corruption and legal predictability. Further analysis demonstrates, however, that this effect may be explained by differences in judicial independence. Common law systems are associated with a higher level of judicial independence, and this greater independence is associated with the benefits associate with common law. Upon even closer analysis, however, I find that common law appears to have significant benefits for legal predictability that are not attributable to greater judicial independence.

JEL Classifications: K00

Working Paper Series