Demand for Law in the African Private Sector

Abstract

Abstract This article develops a model for explaining private sector response to law reforms in developing countries. The dependent variable in this model is the demand for law – the extent to which business owners and firm managers engage the formal legal system and attempt to mobilize the law to their advantage when making market decisions. Demand for law is a crucial micro-connection in the causal chain linking law and law reform to market expansion and economic development. The theoretical framework developed here focuses on the interplay between informal and formal social institutions in influencing market decisions made by private sector actors. The article tests hypotheses generated by this framework by analyzing survey data collected from business firms in Dar es Salaam, Tanzania. The results support the hypothesis that demand for law is shaped by informal market institutions, particularly the informal business networks developed and maintained by firms. The analysis further suggests that these “demand-side” variables matter more than “supply-side” variables identified in the social science literature. These findings have important implications for law reform initiatives in developing countries and suggest avenues for further social science research on the relationship between law and economic development.