Legal Traditions and Economic Performances: Theory and Evidence

ENCYCLOPEDIA OF LAW AND ECONOMICS, Francesco Parisi and Richard Posner, eds., Forthcoming

Amsterdam Center for Law & Economics Working Paper No. 2010-12

40 Pages Posted: 6 Nov 2010 Last revised: 18 Mar 2015

See all articles by Carmine Guerriero

Carmine Guerriero

Department of Economics, University of Bologna

Date Written: November 14, 2010

Abstract

The law and the economy are deeply influenced, in a great part of the world, by either the civil or the common law tradition. These two bundles of institutions emerged in Europe during the medieval period, were spread internationally through colonization and imitation, and operate in different ways. While common law recognizes a crucial role to precedents and is grounded on flexible adjudication procedures, civil law relies on legal codes and bright-line adjudication rules. Exploiting these differences and assuming that legal institutions remained unaffected after transplantation, the "legal origins" project has provided evidence suggesting that civil law countries display less secure investor rights, a stricter market regulation and more inefficient courts than common law countries do. This chapter discusses the main merits and failures of this literature. First, I summarize the theoretical works comparing the two traditions; then, I review the empirical studies looking at the relation among legal origins and economic outcomes, and I discuss their most heavily criticized underlying assumptions. In particular, I emphasize a recent work showing that transplanted institutions change over time due to primitive social factors. Hence, I conclude that future studies should consider the evolving nature of legal systems and that the determinants of this evolution also shape the economic performances we are interested to explain.

Keywords: Legal Origins, Culture, Democracy, Economic Development

JEL Classification: K40, Z1, H11, 010, P16

Suggested Citation

Guerriero, Carmine, Legal Traditions and Economic Performances: Theory and Evidence (November 14, 2010). ENCYCLOPEDIA OF LAW AND ECONOMICS, Francesco Parisi and Richard Posner, eds., Forthcoming; Amsterdam Center for Law & Economics Working Paper No. 2010-12. Available at SSRN: https://ssrn.com/abstract=1703467

Carmine Guerriero (Contact Author)

Department of Economics, University of Bologna ( email )

Strada Maggiore 45
Bologna, 40125
Italy

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