In economics, the legal origins theory states that many aspects of a country's economic state of development are the result of their legal system, most of all where a particular country received its law from. The first papers on the theory were published from 1997 onwards by a group of researchers around Andrei Shleifer. Face-to-face trading interactions on the New York Stock Exchange trading floor. ... Year 1997 (MCMXCVII) was a common year starting on Wednesday (link will display full 1997 Gregorian calendar). ... Andrei Shleifer (born February 20, 1961) is a prominent academic economist. ...

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. It has been suggested that Benign colonialism be merged into this article or section. ... This article concerns the common-law legal system, as contrasted with the civil law legal system; for other meanings of the term, within the field of law, see common law (disambiguation). ... Civil law or Continental law or Romano-Germanic law is the predominant system of law in the world. ... Scandinavia is a historical and geographical region centered on the Scandinavian Peninsula in Northern Europe and includes the three kingdoms of Denmark, Norway and Sweden. ...

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 many other fields, such as whether or not a country is likely to have military service (common law countries are least likely to). Corporations law or corporate law is the law concerning the creation and regulation of corporations. ... This article does not cite any references or sources. ...

Criticism

Especially the earlier papers developing the theory faced a lot of criticism. Most of all, the research underlying the indexes on specific legal rules used in the earlier papers on corporate law did not meet the basic minimum standards of comparative law and thus crudely mischaracterized continental European corporate governance systems. The authors of those papers thus had to face a lot of hostility from European corporate law scholars. However, indexes made in later papers somewhat improved on this point. To meet Wikipedias quality standards, this article or section may require cleanup. ... World map showing the location of Europe. ... Corporate governance is the set of processes, customs, policies, laws and institutions affecting the way a corporation is directed, administered or controlled. ...

The question of whether the Legal Origins Theory adequately describes reality it is still hotly debated, most of all among financial economists and scholars of corporate law. Financial economics is the branch of economics concerned with resource allocation over time. ...

Proponents

• Andrei Shleifer
• Robert W. Vishny