Legal Origins and Informal Finance

57 Pages Posted: 8 Jun 2021 Last revised: 23 Jun 2021

See all articles by Jiafu An

Jiafu An

University of Aberdeen

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Date Written: June 12, 2021

Abstract

We study the impact of legal origins on informal financial development using a new, manually georeferenced dataset in a novel empirical framework. In the 19th century, Europeans arbitrarily designed colonial borders that partitioned many ethnicities across multiple countries in Africa. By comparing the bordering regions with different legal origins but belonging to the same ethnic homeland, we discover that the common law regions have better informal financial development today. Our mechanism analyses suggest that places with a common law origin maintain a style of social control that supports private market interactions, promotes good legal cultures, and facilitates information flow.

Keywords: Legal origins, Financial development, Informal finance, Legal culture, Adaptability

JEL Classification: G21, G51, O16, O55

Suggested Citation

An, Jiafu and Lin, Chen, Legal Origins and Informal Finance (June 12, 2021). Available at SSRN: https://ssrn.com/abstract=3862205 or http://dx.doi.org/10.2139/ssrn.3862205

Jiafu An

University of Aberdeen ( email )

King's College
Aberdeen
Aberdeen, AB24 3FX
United Kingdom

HOME PAGE: http://www.jiafuan.net

Chen Lin (Contact Author)

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

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