Endogenous Legal Traditions and Economic Outcomes

36 Pages Posted: 20 Jul 2012 Last revised: 21 Sep 2015

See all articles by Carmine Guerriero

Carmine Guerriero

Department of Economics, University of Bologna

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Date Written: September 20, 2015

Abstract

Outcomes are deeply influenced by the set of institutions used to aggregate the citizens' preferences over the harshness of punishment, i.e., the legal tradition. I show that while under common law appellate judges' biases offset one another at the cost of legal uncertainty, under civil law the legislator chooses a certain legal rule that is biased only when he favors special interests, i.e., when preferences are sufficiently heterogeneous and/or political institutions are sufficiently inefficient. Thus, common law can produce better outcomes only under this scenario. To test this prediction, I construct a novel continuous measure of legal traditions for 49 transplants, many of which reformed the transplanted institutions, and I devise an instrumental variables approach dealing with the endogeneity of both legal and political institutions. The evidence, which is robust across several strategies, confirms the model implications and stresses the relevance of distinguishing between proxies measuring only the technological efficiency of the law and those picking up also the citizenry's satisfaction with its cultural content.

Keywords: legal origins, culture, political institutions, economic development

JEL Classification: K40, Z1, H11, O10, L5, P16

Suggested Citation

Guerriero, Carmine, Endogenous Legal Traditions and Economic Outcomes (September 20, 2015). Amsterdam Center for Law & Economics Working Paper No. 2012-05, Amsterdam Law School Research Paper No. 2012-80, Available at SSRN: https://ssrn.com/abstract=2112099 or http://dx.doi.org/10.2139/ssrn.2112099

Carmine Guerriero (Contact Author)

Department of Economics, University of Bologna ( email )

Strada Maggiore 45
Bologna, 40125
Italy

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