Legal Reforms and Economic Performance : Revisiting the Evidence

This paper investigates whether legal reforms intended to create a market-friendly regulatory business environment have a positive impact on economic and financial outcomes. After conducting a critical review of the legal origins literature, the au...

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Main Authors:	Oto-Peralías, Daniel, Romero-Ávila, Diego
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2017
Subjects:	LEGAL ECONOMIC PERFORMANCE GOVERNANCE FINANCE GROWTH POLICY legal reform political economy regulation
Online Access:	http://documents.worldbank.org/curated/en/214381487758903991/revisiting-the-evidence http://hdl.handle.net/10986/26213

id	okr-10986-26213
recordtype	oai_dc
spelling	okr-10986-262132021-05-25T08:57:56Z Legal Reforms and Economic Performance : Revisiting the Evidence Oto-Peralías, Daniel Romero-Ávila, Diego LEGAL ECONOMIC PERFORMANCE GOVERNANCE FINANCE GROWTH POLICY legal reform political economy regulation This paper investigates whether legal reforms intended to create a market-friendly regulatory business environment have a positive impact on economic and financial outcomes. After conducting a critical review of the legal origins literature, the authors first analyze the evolution of legal rules and regulations during the last decade (2006-2014). For that purpose, the authors use legal/regulatory indicators from the Doing Business Project (World Bank). The authors findings indicate that countries have actively reformed their legal systems during this period, particularly French civil law countries. A process of convergence in the evolution of legal rules and regulations is observed: countries starting in 2006 in a lower position have improved more than countries with better initial scores. Also, French civil law countries have reformed their legal systems to a larger extent than common law countries and, consequently, have improved more in the majority of the Doing Business indicators used. Second, the authors estimate fixed-effects panel regressions to analyze the relationship between changes in legal rules and regulations and changes in the real economy. The authors findings point to a lack of systematic effects of legal rules and regulations on economic and financial outcomes. This result stands in contrast to the widespread belief that reforms aiming to strengthen investor and creditor rights (and other market-friendly policies) systematically lead to better economic and financial outcomes. It seems that improvements in these legal rules are not sufficient conditions for that. Finally, the authors conduct an exploratory analysis of the determinants of the effectiveness of legal reforms and the gap between legal rules and the reality on the ground. 2017-03-06T23:16:39Z 2017-03-06T23:16:39Z 2017-01 Working Paper http://documents.worldbank.org/curated/en/214381487758903991/revisiting-the-evidence http://hdl.handle.net/10986/26213 English en_US World Development Report Background Paper; CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Working Paper
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	LEGAL ECONOMIC PERFORMANCE GOVERNANCE FINANCE GROWTH POLICY legal reform political economy regulation
spellingShingle	LEGAL ECONOMIC PERFORMANCE GOVERNANCE FINANCE GROWTH POLICY legal reform political economy regulation Oto-Peralías, Daniel Romero-Ávila, Diego Legal Reforms and Economic Performance : Revisiting the Evidence
relation	World Development Report Background Paper;
description	This paper investigates whether legal reforms intended to create a market-friendly regulatory business environment have a positive impact on economic and financial outcomes. After conducting a critical review of the legal origins literature, the authors first analyze the evolution of legal rules and regulations during the last decade (2006-2014). For that purpose, the authors use legal/regulatory indicators from the Doing Business Project (World Bank). The authors findings indicate that countries have actively reformed their legal systems during this period, particularly French civil law countries. A process of convergence in the evolution of legal rules and regulations is observed: countries starting in 2006 in a lower position have improved more than countries with better initial scores. Also, French civil law countries have reformed their legal systems to a larger extent than common law countries and, consequently, have improved more in the majority of the Doing Business indicators used. Second, the authors estimate fixed-effects panel regressions to analyze the relationship between changes in legal rules and regulations and changes in the real economy. The authors findings point to a lack of systematic effects of legal rules and regulations on economic and financial outcomes. This result stands in contrast to the widespread belief that reforms aiming to strengthen investor and creditor rights (and other market-friendly policies) systematically lead to better economic and financial outcomes. It seems that improvements in these legal rules are not sufficient conditions for that. Finally, the authors conduct an exploratory analysis of the determinants of the effectiveness of legal reforms and the gap between legal rules and the reality on the ground.
format	Working Paper
author	Oto-Peralías, Daniel Romero-Ávila, Diego
author_facet	Oto-Peralías, Daniel Romero-Ávila, Diego
author_sort	Oto-Peralías, Daniel
title	Legal Reforms and Economic Performance : Revisiting the Evidence
title_short	Legal Reforms and Economic Performance : Revisiting the Evidence
title_full	Legal Reforms and Economic Performance : Revisiting the Evidence
title_fullStr	Legal Reforms and Economic Performance : Revisiting the Evidence
title_full_unstemmed	Legal Reforms and Economic Performance : Revisiting the Evidence
title_sort	legal reforms and economic performance : revisiting the evidence
publisher	World Bank, Washington, DC
publishDate	2017
url	http://documents.worldbank.org/curated/en/214381487758903991/revisiting-the-evidence http://hdl.handle.net/10986/26213
_version_	1764461159711244288

Legal Reforms and Economic Performance : Revisiting the Evidence

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