Measuring Unmeasurable: How to Map Laws to Numbers Using Leximetrics

36 Pages Posted: 23 Mar 2021

See all articles by Konstantin A. Kholodilin

Konstantin A. Kholodilin

German Institute for Economic Research (DIW Berlin)

Linus Pfeiffer

German Institute for Economic Research (DIW Berlin), Students

Date Written: March 2021

Abstract

As the institutional literature convincingly shows, socioeconomic phenomena are to a large extent shaped by the formal institutions, that is, legal acts (laws and ordinances). However, the latter are formulated in a specific language that is difficult to understand, let alone to measure. However, since the early 1990s, a whole branch of economic analysis of governmental regulations has evolved. It is known as leximetrics, i.e., the measuring of laws. It covers a wide range of economic sectors, such as financial, labor, housing, and product markets, among others. The two most popular methods are codification and surveys. Under the first method, the legal texts are analyzed, relevant provisions extracted, and numeric values assigned depending on these provisions. Under the surveys method, local experts are asked to provide their assessment of currently valid legal provisions and sometimes also their enforcement. In both cases, the legal texts are mapped onto real-valued indices with the objective of gauging the intensity of governmental regulations. These indices can be and are successfully used to explain the economic phenomena. This study provides a comprehensive overview of the leximetric literature and demonstrates interdependences between different types of governmental regulations.

Keywords: Leximetrics, governmental regulations, economics

JEL Classification: C43,H24,K25,R38

Suggested Citation

Kholodilin, Konstantin A. and Pfeiffer, Linus, Measuring Unmeasurable: How to Map Laws to Numbers Using Leximetrics (March 2021). DIW Berlin Discussion Paper No. 1933, Available at SSRN: https://ssrn.com/abstract=3810489 or http://dx.doi.org/10.2139/ssrn.3810489

Konstantin A. Kholodilin (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Linus Pfeiffer

German Institute for Economic Research (DIW Berlin), Students ( email )

Germany

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