Legal Origins? A Non Sequitur.

Abstract

Understanding the determinants of the institutions used to aggregate the citizens’ preferences over the harshness of punishment—i.e., the legal tradition—is a key issue in comparative law. To shed light on this point, I build on a recent theoretical literature studying how jurisdictions differing in their degree of preference heterogeneity and quality of the political process select their legal tradition. While under common law appellate judges’ biases offset one another at the cost of legal uncertainty, under civil law the legislator chooses a certain legal rule that is biased only when special interests are favored, i.e., whenever preferences are sufficiently heterogeneous and/or political institutions are sufficiently inefficient. Then, only under this scenario, common law can be selected and produce better economic outcomes. To test such implication, I study 51 transplants and I construct proxies for their legal tradition, economic outcomes, genetic distance from the legal origin and strength of norms of self-reliance. While genetic distance was exogenously driven by the colonial transplantation process and picks the gap between each transplant’s preferences and those of its origin, a culture of self-reliance captures each transplant’s long-lived—and often precolonial—social aversion for a hierarchical control and is, thus, related to more efficient political institutions. Consistent with the theory, law making and adjudication institutions typical of a pure common law tradition are found where genetic distance is the largest and self-reliance is the weakest. Moreover, reforms towards these arrangements decrease the stock market capitalization and the private credit in transplants with lower than average genetic distance, while reducing the unemployment rate in transplants with weaker than average norms of self-reliance. These results stress the relevance of considering the evolution and endogeneity of legal traditions and raise concerns about the reforms inspired by the legal origins theory and recently implemented in developing countries.