Legal traditions and initial endowments in shaping the path of financial development
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This paper finds remarkable heterogeneity in the relationship between legal traditions and finance in former colonies. The effect of the British common law on financial development is conditioned by the level of initial endowments. In former colonies with low precolonial population density, the common law has promoted high financial development, but where endowments were abundant, this legal tradition has not worked well. In contrast, the effect of the French civil law on finance is invariant to endowments. British common law countries do not exhibit greater financial development levels than French civil law countries when endowments are sufficiently high.
Oto-Peralías , D & Romero-Ávila , D 2014 , ' Legal traditions and initial endowments in shaping the path of financial development ' Journal of Money, Credit and Banking , vol 46 , no. 1 , pp. 43–77 . DOI: 10.1111/jmcb.12097
Journal of Money, Credit and Banking
© 2014 The Ohio State University. This work is made available online in accordance with the publisher’s policies. This is the author created, accepted version manuscript following peer review and may differ slightly from the final published version. The final published version of this work is available from Wiley Online Library at DOI: 10.1111/jmcb.12097
DescriptionThe authors acknowledge financial support from the Spanish Ministry of Science and Technology through grant ECO2009-13357, the Spanish Ministry of Economics and Competitiveness through grant ECO2012-35430, and the Andalusian Council of Innovation and Science under Excellence Project SEJ-4546.
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