Journal of Economic Surveys

THE ROLE OF LAW IN ECONOMIC GROWTH: A LITERATURE REVIEW

Authors

  • Guangdong Xu

    1. China University of Political Science and Law
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    • I am grateful to Michael Faure, Binwei Gui, Wei Zhang, Gilberto Antonelli, Merritt Fox, Rainer Kulms, Eric Posner, and two anonymous referees for helpful comments, and Wenming Xu and Jianyu Hu for research assistance. I am responsible for all remaining errors.


Abstract

Abstract Compared with other explanatory variables, such as capital accumulation, technological innovations, geographical endowments, economic openness, and cultural factors, institutions, especially legal institutions have been regarded as a crucial condition for economic growth in recent years. The importance of legal rules is systematically revealed by a series of cross-country econometric studies conducted by La Porta et al., who claim that legal origins are central to understanding the divergence in living standards across the regions and countries of the world and, compared with civil law countries, especially those countries with French civil law tradition, common law countries have enjoyed superior economic outcomes. The controversies set off by La Porta et al.'s proposition indicate that there are a number of questions that are difficult to explain by La Porta et al.'s theory, and hence call for more work on comparative analysis of different legal families before a consensus can be reached.

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