Legal

Question 1

Main role of government?

Answer 1

Glaeser and Sheifer 2002

Secure property rights

Question 2

Describe common law

Answer 2

Juries, broad legal principles, oral arguments

England and Commonwealth

Question 3

Describe civil law

Answer 3

Origins in Roman law. Legal codes, written records, judges

Question 4

Origins of comon/civil

Answer 4

Glaeser and Shleifer 2002
Both chose most efficient system at the time!
France: Local magnates were powerful enough to subvert juries.
Magna Carta as a ‘Coasian Bargain’

Question 5

Why do rich countries have better institutions?

Answer 5

Fixed costs (higher demand in rich)
Poor countries: Weak institutions set up (extractive), which have maintained due to hysteresis/ path dependency

Question 6

Civil law at similar levels of development?

Answer 6

Tend to have higher regulation, less secure property rights (Hayek 1960), less financial development, less efficiency of G, less pol freedom

Question 7

Legal origins and regulation?

Answer 7

Civil law associated with more regulation (G&S 2002)

and La Porta et al (2008)

Question 8

Procedural formalism?

Answer 8

Djankov et al 2003

• Legal origins explain 40% of difference
• Also correlated with lower consistency for civil.
• Europeans transplanting legal systems led to inefficiently high formalism

Question 9

Judicial independence and constitutional review and legal origins?

Answer 9

Both evident in higher quantity for common law (Hayek 1960)

Question 10

Judicial independence

Answer 10

Secure property rights / prevent G exerting influence when as either a litigant or with a special interest

Question 11

Constitutional review

Answer 11

Government policy subject to review by courts interpreting the constitution
E.g. Trump’s migrant ban.
Prevents ‘tyranny of the majority’ (Stuart Mill 1859), which can lead to similar oppression of minorities as a tyrant!

Question 12

JI and CR on growth

Answer 12

La Porta et al 2004

Survey of 71 countries finds correlation of these and growth

Question 13

Effects of origins on growth?

Answer 13

Controlling for human K, etc: 0.6% slower growth in civil law 1960-2000 (La Porta et al 2008)
Moved ahead in 20thC due to investor protection laws (Rajan and Zingales 2003)

Question 14

Investor protection and legal origins

Answer 14

Rajan and Zingales 2003
Vast literature finding that investor protection leads to growth (King and Levine 1993)
Timing is consistent with investor protection being key driver (20thC) of differences

Question 15

Objections to legal origins?

Answer 15

Proxies for culture/ religion? (Stulz and Williamson 2003)

No: Through analysis of shareholder rights, we see legal origins still significant (Djankov et al 2007)

Question 16

Objection to legal origins: Proxies for politics?

Answer 16

Suggestion: Legal institutions are a result of insiders (historically family alliances) securing econ rents.

However, NO! La Porta et al (2008):
Legal origins still significant after controlling for politics
‘legal origins are not a proxy for leftist politics’
‘even in response to political demands, reforms are consistent with legal origins’