Working Paper: CEPR ID: DP8139
Authors: Thorsten Beck
Abstract: Legal institutions are critical for the development of market-based economies. This paper defines legal institutions and discusses different indicators to measure their quality and efficiency. It surveys a large historical and empirical literature showing the importance of legal institutions in explaining cross-country variation in economic development. Finally, it presents and discusses three different views of why we can observe the large cross-country variation in legal institutions, the social conflict, the legal origin and the culture and religion hypotheses.
Keywords: economic development; legal institutions; legal system; indicators; property rights
JEL Codes: K1; K4; O16; O43; P14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Efficiency of legal institutions (K00) | Increased entrepreneurial activity (L26) |
| Efficiency of legal institutions (K00) | Innovation (O35) |
| Well-defined and protected property rights (P14) | Increased entrepreneurial activity (L26) |
| Effective legal institutions (P37) | Promoting firm growth (L25) |
| Effective legal institutions (P37) | Providing certainty to investors regarding their returns (G12) |
| Legal institutions (D02) | Structure of financial systems (G20) |
| Better legal frameworks (K40) | Larger credit and stock markets (G19) |
| Legal institutions (D02) | Mitigating market frictions (D47) |