Abstract
In this paper, we study the dynamics of legal rules in a model with two nation-states playing a non cooperative game. For each country, changing the legal system is a costly process. At the same time, the existence of different legal systems is also costly for all nation-states. We show that despite the non cooperative behavior of countries, a process of legal convergence is achieved in the long run through small step by step changes. This result depends neither on the number of players in the game, nor on the time horizon of policy makers. Complete legal convergence can be obtained in a finite time. Coordinated efforts to achieve legal convergence are then unnecessary. We show that they might even be counterproductive, in the sense that the welfare of nation-states is higher under legal competition, compared to cooperative legal unification.
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Notes
The URL of the working paper is http://economix.fr/docs/715/Proofs.pdf.
See Baniak and Grajzl (2012) for an analysis which takes into account incomplete information about the local conditions prevailing in other nation-states.
In addition, Gomez Pomar (2008) indicates that legal drafting may be costly because one has to invest political capital to convince the relevant public of the virtues of new legislation, and to overcome opposition from interest groups which may be harmed by legal reform. Casella (2001) highlights the existence of important lobbying costs, and Herings and Kanning (2008) point out the costs for lawyers of learning unfamiliar legal solutions.
Legal transplants are an example of a non-cooperative process. Carbonara and Parisi (2007) define legal transplantation as “the introduction, in national legal systems, of statutes and principles belonging to other systems, be they legal rules of other countries or customs whose acceptance is widespread”. Another example is the Convention on International Sales of Goods (CISG); see Herings and Kanning (2008). One may also observe that the absence of legal cooperation can also be interpreted as an extreme form of legal harmonization in which nation-states have wide freedom of choice for adapting their legal rules.
Our result also challenges a result of Garoupa and Ogus (2006), who argue that though it may be in the interest of two nation-states to adjust their legal systems, a coordination problem may prevent them from doing so. Indeed, each nation-state would prefer its own set of legal rules and practices to prevail and that the other nation-state bears the adjustment burden. This conclusion, obtained in a static framework with discrete choices, is no more true in a dynamic setting and a continuum of choices.
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Acknowledgements
We gratefully acknowledge the helpful comments from the editor in chief William F. Shughart, an associate editor, and two anonymous referees. We also thank Laurent Benzoni, Andreea Cosnita, Susan Crettez and Mathilde Orsini-Amieux for helpful advices. We bear sole responsibility for any errors or deficiencies.
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Crettez, B., Deffains, B. & Musy, O. On the dynamics of legal convergence. Public Choice 156, 345–356 (2013). https://doi.org/10.1007/s11127-011-9907-7
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DOI: https://doi.org/10.1007/s11127-011-9907-7