We analyze the relationship between legal institutions, innovation and growth. We compare a rigid (law set ex-ante) legal system and a exible one (law set after observing current technology). The exible system dominates in terms of welfare, amount of innovation and output growth at intermediate...

All Courts rule ex-post, after most economic decisions are sunk. This might generate a time-inconsistency problem. From an ex-ante perspective, Courts will have the (ex-post) temptation to be excessively lenient. This observation is at the root of the principle of stare decisis. Stare decisis...