Legal origins theory: Encyclopedia II - Legal origins theory - Theory

Legal origins theory - Theory

Since, historically, most countries received their law through colonial transplantation, law is considered to be exogenous to the analysis. Some economists have thus classified countries on whether they adhere to common law or whether their legal system is based on French civil law, German civil law or Scandinavian civil law and done empirical research finding correlations between economic indicators and that classification.

The basic thrust of the theory is that common law, as opposed to French civil law, and to a lesser degree to German and Scandinavian civil law, is associated with more orientation towards institutions of the market (instead of state interventionism), which is why, according to proponents of the Legal Origins Theory, common law countries tend to be economically more developed.

While the theory originally started out in corporate law, where common law was found to be correlated with better shareholder protection and more developed financial markets, the theory has in the meantime been extended to lots of other fields, such as whether or not a country is likely to have military service (common law countries are least likely to).

Adapted from the Wikipedia article "Theory", under the G.N U Free Docmentation License. Please also see http://en.wikipedia.org/wiki