Abstract
Considering the large number of legal reforms implemented over the period 2006–2014, particularly in French civil law countries, this chapter aims to establish whether variation in legal rules and regulatory outcomes have been associated with an improvement in financial and economic developmental outcomes. By estimating panel specifications using a fixed effects estimator with data averaged over 3-year periods, the evidence does not support the existence of a clear-cut effect of legal rules and regulatory indicators on financial and economic performance. This finding appears to accord with the view of those that question the widespread tendency in the lawmaking sphere over the past decade to imitate tools related to the common law (the pretended winning origin). If the common law does not systematically lead to better legal rules and institutions than the French civil law (as the recent critical literature suggests), it is far from clear that adopting common-law tools will improve the efficiency of the legal system and the performance of the economy.
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Notes
- 1.
The fact that results remain unchanged irrespective of the inclusion or not of lagged GDP growth indicates that endogeneity issues may not be important for this result. Likewise, the robustness of the baseline finding to using either annual or 3-year averaged data further indicates that business-cycle effects inducing reverse causality may not be important either. Notwithstanding, below we explicitly deal with the issue of endogeneity by employing the difference and system GMM estimators, which render fairly similar results to those obtained from the application of the LSDV estimator.
- 2.
The rule of law index measures confidence in and compliance with the rules of society in 2000. The scale ranges from −2.5 to 2.5, where a higher value indicates better institutions. It comes from the Worldwide Governance Indicators (WGI) project [see Kaufmann et al. (2009), from Teorell et al. (2011)].
- 3.
Government effectiveness reflects perceptions about the quality of public administration. Year 2000. The scale ranges from −2.5 to 2.5, where a higher value indicates better institutions. It comes from the Worldwide Governance Indicators (WGI) project [see Kaufmann et al. (2009), from Teorell et al. (2011)].
- 4.
See Table 6.4 for the detailed results.
- 5.
Figures A.1–A.4 plot the average annual variation in each of the development outcomes over the period 2006–2014 against the average annual variation in the indicators of debt recovery rate, contract enforcement, starting a business and registering a property, respectively. It is remarkable that the results appear in line with those for the law on the books indicators.
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Oto-Peralías, D., Romero-Ávila, D. (2017). Legal Rules Variation and Countries’ Economic and Financial Performance. In: Legal Traditions, Legal Reforms and Economic Performance. Contributions to Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-67041-6_6
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DOI: https://doi.org/10.1007/978-3-319-67041-6_6
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