When Does Legal Origin Matter?

40 Pages Posted: 10 Dec 2008 Last revised: 14 Jan 2009

See all articles by Mohammad Amin

Mohammad Amin

World Bank - Enterprise Analysis Unit

Priya Ranjan

University of California, Irvine - Department of Economics

Date Written: December 31, 2008

Abstract

This paper takes another look at the extent of business regulation in civil law versus common law countries. In contrast to existing studies that find a heavier role of government in the civil law countries, we show that this holds only for a subset of civil and common law countries that have well developed political institutions but not otherwise. In short, it is the interaction between legal origin and the quality of political institutions and not legal origin alone that can explain differences in the level of regulation across countries. For example, focusing on entry regulations, our results show that the number of procedures required to start a business are lower in common law compared with civil law countries by 2.5 procedures or 24.3% of the sample mean. However, this difference varies sharply across the sample of countries with high and low levels of political accountability. It equals a large 3.4 procedures (37% of the sample mean) for the former and a mere 1.1 procedures (9.7% of the sample mean) for the latter. We provide plausible explanations for these findings based on recent contributions to the literature on political and legal institutions.

Keywords: Legal Origin, Regulation, Political Institutions

JEL Classification: H11, K2, P48, P51

Suggested Citation

Amin, Mohammad and Ranjan, Priya, When Does Legal Origin Matter? (December 31, 2008). Available at SSRN: https://ssrn.com/abstract=1314312 or http://dx.doi.org/10.2139/ssrn.1314312

Mohammad Amin (Contact Author)

World Bank - Enterprise Analysis Unit ( email )

2121 Pennsylvania Avenue, NW
Washington, DC 20433
United States

Priya Ranjan

University of California, Irvine - Department of Economics ( email )

3151 Social Science Plaza
Irvine, CA 92697-5100
United States

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