Are International Merchants Stupid? - a Natural Experiment Refutes the Legal Origin Theory
22 Pages Posted: 10 Oct 2005
Date Written: September 2005
Abstract
In economics, there is currently an important discussion on the role of legal origins or legal families. Some economists claim that legal origins play a crucial role until today. Usually, they distinguish between Common Law, French, Scandinavian and German legal origin. When these legal origins are compared, countries belonging to the Common Law tradition regularly come out best (with regard to many different dimensions) and countries belonging to the French legal origin worst.
International arbitration provides an ideal natural experiment to test this view empirically: in international trade, the contracting parties are free to choose the substantive law that suits their interests best. If the literature just cited was correct, we would expect that rational traders would structure their interactions according to some substantive law based on the Common Law tradition such as British or US American law. Although exact statistics are not readily available, the evidence from cases that end up with international arbitration courts (such as the International Court of Arbitration run by the International Chamber of Commerce in Paris) clearly demonstrates that this is not the case.
Keywords: Legal Origins, International Arbitration, Choice of Substantive Law
JEL Classification: F23, K12, P48
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Economic Growth and Judicial Independence: Cross Country Evidence Using a New Set of Indicators
By Lars P. Feld and Stefan Voigt
-
Inflation Culture, Central Bank Independence and Price Stability
By Bernd Hayo
-
By Stefan Voigt
-
Choosing Not to Choose: When Politicians Choose to Delegate Powers
By Stefan Voigt and Eli Salzberger
-
Attitudes Towards Inflation and the Viability of Fixed Exchange Rates: Evidence from the EMS
-
A Public Choice Case for the Administrative State
By David B. Spence and Frank B. Cross
-
Making Judges Independent - Some Proposals Regarding the Judiciary
By Lars P. Feld and Stefan Voigt
-
Economic Analysis and the Design of Constitutional Courts
By Tom Ginsburg