Implementing decentralized legal frameworks requires reasonable laws, adequate institutions, and market-oriented incentives. All three must exist together. In transition economies, not only must new laws be drafted but they must be accompanied by the growth of supportive institutions. And they...

The natural gas industry combines activities with natural monopoly characterisitics with those that are potentially competitive. Pipeline transport and distribution, which have natural monopoly characterisitcs, require regulation of price and non-price behavior. Production is a contestable...

Why does a country's legal origin influence its firms'access to finance? Using data from over 4,000 firms in 38 countries, the authors show that firms in countries with French legal origin face significantly higher obstacles in accessing external finance than firms in common law countries. Next,...

The authors study the impact of corruption in a host country on foreign investors'preference for a joint venture, or a wholly owned subsidiary. Their simple model highlights a basic tradeoff in using local partners. On the one hand, corruption makes the local bureaucracy less transparent, and...

The author presents measures with which to map institution building during the transition from centrally planned to market economies. Data collection and indicators are measured in terms of five institutional dimensions of governance: a) accountability; b) quality of the bureaucracy; c) rule of...

The relationship between decentralization of government activities and the extent of rent extraction by private parties is an important element in the recent debate on institutional design. The theoretical literature makes ambiguous predictions about this relationship, and it has remained...

Many societies have limited corruption through the broad-based mobilization of a diverse range of interests willing and able to defend themselves by making meaningful demands for accountability of, and limits on, official power, and for an end to illicit advantages enjoyed by others....

This paper provides an alternative way of testing the theory of legal origins, one based on a firm's perception of how helpful the government is for doing business. The author argues that an approach based on firm perceptions offers a number of advantages over existing studies. Specifically, the...

A burgeoning literature finds that financial development exerts a first-order impact on long-run economic growth, which raises critical questions, such as why do some countries have well-developed growth-enhancing financial systems while others do not? The law and finance theory focuses on the...

The authors assess three established theories about the historical determinants of financial development. They also propose an augmented version of one of these theories. The law and finance view, stresses that different legal traditions emphasize, to differing degrees, the rights of individual...