Legal Origin, Income Inequality and Social Health
Posted: 9 Jun 2014
Date Written: June 9, 2014
This study considers the association between legal origin, income inequality and one specific measure of social health - child mortality. In an influential body of work, La Porta et al. (1997, 1998) developed the proposition that stock market size and consequent economic development were promoted by a legal system which protected the interests of shareholders. Their investigation of legal regimes showed that common law countries generally offer stronger legal protection for shareholders than their civil law counterparts. Their immensely influential research has informed the basis of international policy prescriptions which aim to enhance the legal protection to shareholders; most notably, their research underpins international development initiatives by the World Bank. However, we contend that such policy initiatives, with their exclusive focus on economic criteria, are somewhat myopic. By considering the link between legal origin, income inequality and child mortality, this paper finds that common law countries (i.e. those with the greater legal protection for investors) exhibit greater levels of income inequality and have worse social outcomes in terms of under 5 child mortality.
Keywords: Legal traditions, Social indicators, Corporate governance, Investor protection
JEL Classification: I10
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