Initial Conditions, Institutional Dynamics and Economic Performance: Evidence from the American States

41 Pages Posted: 10 Jan 2004

See all articles by Daniel Berkowitz

Daniel Berkowitz

University of Pittsburgh - Department of Economics

Karen Clay

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management; National Bureau of Economic Research (NBER)

Date Written: March 2004

Abstract

Using state-level data from the United States, we find that differences in colonial legal institutions have affected the current quality of state legal institutions. These differences in colonial legal institutions arose because some states were settled by Great Britain, a common law country, and other states were settled by France, Spain, and Mexico, all civil law countries. To explain these findings, we develop a transplant-civil law hypothesis that highlights the disruption associated with large-scale legal transplantation and the possible relative inefficiencies of colonial civil law. We find strong support for the transplant-civil law hypothesis. Our results are robust to the inclusion of additional variables capturing climate, geography, initial population, resource endowments, state level rules, and legal environment. Given the 150-200 year gap between the initial conditions and the measures of the current quality of legal institutions, we provide indirect evidence on the persistence of legal institutions. We then use initial legal systems as a source of exogenous variation in current institutions for providing a series of estimates of their impact on current economic performance.

Keywords: Common law, civil law, transplant, initial conditions, state courts and public corruption

JEL Classification: K4, O1, P1

Suggested Citation

Berkowitz, Daniel and Clay, Karen B., Initial Conditions, Institutional Dynamics and Economic Performance: Evidence from the American States (March 2004 ). William Davidson Institute . Available at SSRN: https://ssrn.com/abstract=485003 or http://dx.doi.org/10.2139/ssrn.485003

Daniel Berkowitz (Contact Author)

University of Pittsburgh - Department of Economics ( email )

4711 WWPH
Pittsburgh, PA 15260
United States
412-648-7072 (Phone)
412-648-3011 (Fax)

HOME PAGE: http://www.pitt.edu/~dmberk

Karen B. Clay

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management ( email )

Pittsburgh, PA 15213-3890
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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