Does Law Matter for Economic Growth?: A Re-Examination of the 'Legal Origin' Hypothesis

This book addresses the role of legal institutions in economic growth. The massive differences in country incomes are largely the product of economic growth, which is in turn shaped, influenced, and determined by the legal infrastructure of a country. There has been a growing interest in exploring the connection between legal rules and economic growth since the 1990s, which can be attributed to the influence of Harvard economist Andrei Shleifer and his colleagues (the so-called LLSV). LLSV substantially contribute to our understanding of the economic consequences of legal rules. However, their studies face serious challenges, and leave a number of questions unresolved. This book is part of the academic efforts to fill gaps in LLSV's studies. The contribution of and controversy over LLSV's studies are systematically reviewed. In addition, the book scrutinises the relationship between law (both corporate and securities law) and stock market development, analyses the role of property law in economic development, and examines the growth experience of China. Does Law Matter for Economic Growth? will help readers to reach a deeper understanding of the relationship between law and economic growth by revealing the weaknesses in and problems with LLSV's studies, by offering new evidence (historical, comparative, and empirical) that cast serious doubts over LLSV's conclusions, and by analysing certain apparent anomalies that can hardly be explained by LLSV's theory. A more cautious stance regarding the law and growth nexus is ultimately reached. Law matters for economic performance, but the extent to which it matters is defined by a broader context within which political, legal, economic, and social variables influence one another and evolve together over time. It is therefore imprudent to embrace legal reform as a panacea for economic backwardness. The analysis offered by this book makes it an important resource for academics and policy makers alike.

Table of Contents:
CONTENTS Acknowledgements List of Abbreviations List of Tables and Figures Chapter 1. Introduction 1.1. Economic Growth: The Big Picture 1.2. Law Matters: What We Know and What We Do Not 1.3. Approach and Structure Chapter 2. The Determinants of Economic Growth: From Harrod - Domar to LLSV 2.1. Introduction 2.2. From Proximate Causes to Fundamental Causes 2.2.1. Proximate Causes: Capital, Technology, and Productivity 2.2.2. Fundamental Causes: Geography, Trade, Culture, and Institutions 2.2.2.1. Geography 2.2.2.2. Trade 2.2.2.3. Culture 2.2.2.4. Institutions 2.3. Law Matters: Contributions of LLSV 2.3.1. Common Law versus Civil Law 2.3.2. Works of LLSV 2.4. Is Common Law Better? Supporting Evidence and Dissenting Opinions 2.4.1. Supporting Evidence 2.4.2. Dissenting Opinions 2.4.2.1. Methodological Weaknesses 2.4.2.2. Problems of Coding and Classifying 2.4.2.3. Contrary Historical Evidence 2.5. Conclusion Appendix: Legal Origins and Economic Performance: Literature Review Chapter 3. Law, Stock Markets, and Economic Growth 3.1. Introduction 3.2. Finance, Stock Markets and Economic Growth: A Brief Overview 3.3. Law and Stock Markets: Does Corporate Law Matter? 3.3.1. Why and How Does Corporate Law Matter? 3.3.2. Questioning the Role of Corporate Law 3.3.2.1. Dissenting Voices from Legal Scholars 3.3.2.2. Challenges from Legal Practices in the United States 3.3.2.3. Negative Empirical Evidence 3.4. Law and Stock Markets: Does Securities Law Matter? 3.4.1. Securities Law in Book 3.4.2. Securities Law in Practice 3.5. Role of Private Mechanisms and Politics 3.5.1. Private Mechanisms Matter 3.5.2. The Role of Politics 3.6. Conclusion Chapter 4. The Role of Property Law in Economic Growth 4.1. Introduction 4.2. Some Basics of Property Rights and Property Law 4.2.1. Definition 4.2.2. Taxonomy 4.3. Property Rights and Economic Performance: Theory and Evidence 4.3.1. Theory 4.3.2. Historical and Cross-Country Evidence 4.3.3. Micro Evidence 4.4. Why Formal Private Property Rights May Fail 4.4.1. Malfunctioning or Nonexistence of Related Factor Markets 4.4.2. Costs of Formal Property Rights 4.4.3. Property Law and Customary Land System 4.4.4. Property Law and the State 4.5. Conclusion Chapter 5. Does Law Matter for China's Economic Growth? 5.1. Introduction 5.2. The "Law Matters" Hypothesis Facing East Asian Experience 5.3. China's Legal System and Its Role in Economic Development 5.4. Law and China's Unbalanced Economy 5.5. Conclusion Chapter 6. Conclusion References

About the Author :

Guangdong Xu is an Associate Professor in the Research Center for Law and Economics at the China University of Political Science and Law (CUPL). He obtained a Bachelor in Economics from the Renmin University of China (1994) and a Ph.D. in Economics from the Graduate School of the Chinese Academy of Social Science (2004), and a PhD in Law from Erasmus School of Law at the Erasmus University Rotterdam (2014). He was first an Assistant Research Fellow at the Institute of Economic System and Management of the National Development and Reform Commission (2004), then an Assistant Professor at CUPL (2005-2008). At the beginning of 2009, he became an Associate Professor at CUPL, and still holds this position today.