Is the World Flat? Country- and Firm-Level Determinants of Law Compliance

This research revisits the effects of a country's institutional framework on individual firms' behavior, focusing, in particular, on firms' propensity to comply with legal rules. We purport to explain the variation in compliance with legal rules by employing a rich data set on thousands of firms from dozens of countries. We find that most of the variation emanates from countrywide differences in institutional quality, although various firm characteristics play a role as well. We also find indications that differences across countries diminish with the level of development. The Author 2009. Published by Oxford University Press on behalf of Yale University. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org, Oxford University Press.