Legal Institutions, Legal Origins, and Governance

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Abstract
The importance of institutions, including legal institutions, to economic development is widely accepted. But to accept the importance of legal institutions does not by itself provide guidance to policymakers in the developing world. One influential body of economic analysis emphasizes the importance of legal origin - that is, the legal family (such as French, German or English) from which a particular developing country's law descended. Aside from the fact that the legal origin literature does not confront squarely its relevance to developing countries, this literature does not provide useful policy guidance because legal origin is a product of historical development and cannot be changed within a time frame relevant to the present generation of policymakers. At the same time, the legal origin literature is potentially misleading for policy purposes because the data underlying its regressions are suspect. Among the weaknesses in the data are various anomalies, including oversimplified coding of a particular country's legal origin (which may indeed differ significantly between its private law and its public law). The emerging governance literature, developed at the World Bank, is compared with the legal origin literature as a practical guide to economic development policymaking.

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