Legal institutions are critical for the development of market-based economies. This paper defines legal institutions and discusses different indicators to measure their quality and efficiency. It surveys a large historical and empirical literature showing the importance of legal institutions in...

We argue that social capital as proxied by regional trust and the Rule of Law can improve aggregate productivity through facilitating greater firm decentralization. We collect original data on the decentralization of investment, hiring, production and sales decisions from Corporate Head Quarters...

The political economy of resource rich countries is surveyed. The empirical evidence suggests that countries with a large share of primary exports in GNP have bad growth records and high inequality, especially if the quality of institutions and the rule of law are bad. The economic argument that...

A growing and deepening divide has opened up between countries where economic development has “taken off” and those caught in a vicious cycle of institutional backwardness and macroeconomic instability. This “Great Divide” is visible in almost every measure of economic performance, such...

This article offers a critical review of recent literature on Chinese legal tradition and argues that some subtle but fundamental differences between the Western and Chinese legal traditions are highly relevant to our explanation of the economic divergence in the modern era. This paper seeks to...

We examine the relation between bureaucratic corruption and firm performance in CEE countries. While previous research uses data from BEEPS, which suffers from excessive non-reporting of corporate performance, we combine reliable firm financials from the Amadeus database with information on...

In this paper we explore the relationship between the individual decision to become an entrepreneur and the institutional context. We pinpoint the critical roles of property rights and the size of the state sector for entrepreneurial activity and test the relationships empirically by combining...

Recent Eurobarometer survey data are used to document and explain the stock of social capital in 27 European countries. Social capital in Central and Eastern Europe – measured by civic participation and access to social networks – lags behind that in Western European countries. Using...

Understanding the impact of legal protection on investment is of major importance. This paper provides a framework for addressing this issue, and shows that investment may actually be higher in the absence of legal protection. Focusing on the application to innovation, in an environment where an...

This paper develops the building blocks for a legal theory of finance. LTF holds that financial markets are legally constructed and as such occupy an essentially hybrid place between state and market, public and private. At the same time, financial markets exhibit dynamics that frequently put...