I present a simple model of two representative firms embedded in an environment of institutionalized government corruption. One firm has access to foreign direct investment , but that access is limited by the quality of rule of law in the economy. I use the model to explore the question,...

The market economy has three pillars: voluntary exchange, purposive rules of the game, and the rule of law. According to classical works by Smith, Rousseau, Hayek and Friedman followed by empirical research by various contemporary economists, the common law system is more conducive to the rule...