CID Working Paper No. 39

Law and Development Paper No. 1

Economic Development, Legality, and the Transplant Effect*

Daniel Berkowitz, Katharina Pistor, and Jean-Francois Richard**

March 2000

Abstract

We analyze the determinants of effective legal institutions (legality) using data from 49 countries. We show that the way the law was initially transplanted and received is a more important determinant than the supply of law from a particular legal family. Countries that have developed legal orders internally, adapted the transplanted law, and/or had a population that was already familiar with basic principles of the transplanted law have more effective legality than countries that received foreign law without any similar pre-dispositions. The transplanting process has a strong indirect effect on economic development via its impact on legality.

Keywords: legal transplants, legal families, legality, effectiveness of legal institutions, economic development

JEL codes: O1, O57, K00

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* An earlier version of this paper was presented at a World Bank seminar on September 21, 1999.

** We would like to than Jan Kleinheisterkamp (Max Planck Institute, Hamburg), for his help with background information on Latin America and the coding of these countries. We are also grateful to the comments of seminar participants at the World Bank and the University of Wisconsin-Madison.

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