When does legal origin matter?

by Mohammad Amin (World Bank) and Priya Ranjan (University of California, Irvine)

Abstract: This paper takes another look at the extent of business regulation in civil law versus common law countries. In contrast to existing studies that find a heavier role of government regulation in the civil law countries, we show that this holds only for a subset of civil and common law countries that have well developed political institutions but not otherwise. In short, it is the interaction between legal origin and the quality of political institutions and not legal origin alone that can explain differences in the level of regulation across countries. We provide plausible explanations for these findings based on recent contributions to the literature on political and legal institutions.

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