Showing papers by "Rafael La Porta published in 2008"
TL;DR: The anti-self-dealing index as mentioned in this paper is a measure of legal protection of minority shareholders against expropriation by corporate insiders, which is calculated for 72 countries based on legal rules prevailing in 2003, and focuses on private enforcement mechanisms such as disclosure, approval, and litigation, that govern a specific selfdealing transaction.
2,447 citations
TL;DR: The authors argued that the historical origin of a country's laws is highly correlated with a broad range of its legal rules and regulations, as well as with economic outcomes, and they summarized this evidence and attempted a unified interpretation.
Abstract: In the last decade, economists have produced a considerable body of research suggesting that the historical origin of a country's laws is highly correlated with a broad range of its legal rules and regulations, as well as with economic outcomes. We summarize this evidence and attempt a unified interpretation. We also address several objections to the empirical claim that legal origins matter. Finally, we assess the implications of this research for economic reform.
2,134 citations
Posted Content•
TL;DR: In this paper, the authors consider three broad views of the role of informal firms in economic development and find that informal firms are small and extremely unproductive, compared even to the small formal firms and especially relative to the larger formal firms.
Abstract: In developing countries, informal firms (those that are not registered with the government) account for about half of all economic activity. We consider three broad views of the role of such firms in economic development. According to the romantic view, these firms would become the engine of economic growth if not stopped by government regulation. According to the parasite view, informal firms, by avoiding taxes and regulations, unfairly compete with the more efficient formal firms and, by taking away their market share, undermine economic progress. According to the dual view, informal firms are highly inefficient, do not pose much threat to the formal firms, but also do not contribute to economic growth, which is driven by the efficient formal firms. Using data from World Bank firm level surveys, we find that informal firms are small and extremely unproductive, compared even to the small formal firms, and especially relative to the larger formal firms. Compared to the informal firms, formal ones are run by much better educated managers. As a consequence, they use more capital, have different customers, market their products, and use more external finance. Hardly any formal firms had ever operated informally. This evidence is inconsistent with the romantic and parasite views, but supports the dual view. In this "Walmart" theory of economic development, growth comes from the creation of the highly productive formal firms. Informal firms keep millions of people alive, but disappear over time.
130 citations
TL;DR: In this article, the authors consider three broad views of the role of informal firms in economic development and find that informal firms are small and extremely unproductive, compared even to the small formal firms and especially relative to the larger formal firms.
Abstract: In developing countries, informal firms (those that are not registered with the government) account for about half of all economic activity. We consider three broad views of the role of such firms in economic development. According to the romantic view, these firms would become the engine of economic growth if not stopped by government regulation. According to the parasite view, informal firms, by avoiding taxes and regulations, unfairly compete with the more efficient formal firms and, by taking away their market share, undermine economic progress. According to the dual view, informal firms are highly inefficient, do not pose much threat to the formal firms, but also do not contribute to economic growth, which is driven by the efficient formal firms. Using data from World Bank firm level surveys, we find that informal firms are small and extremely unproductive, compared even to the small formal firms, and especially relative to the larger formal firms. Compared to the informal firms, formal ones are run by much better educated managers. As a consequence, they use more capital, have different customers, market their products, and use more external finance. Hardly any formal firms had ever operated informally. This evidence is inconsistent with the romantic and parasite views, but supports the dual view. In this "Walmart" theory of economic development, growth comes from the creation of the highly productive formal firms. Informal firms keep millions of people alive, but disappear over time.
62 citations
Posted Content•
TL;DR: The anti-self-dealing index as discussed by the authors is a measure of legal protection of minority shareholders against expropriation by corporate insiders, which is calculated for 72 countries based on legal rules prevailing in 2003, and focuses on private enforcement mechanisms such as disclosure, approval, and litigation, that govern a specific selfdealing transaction.
Abstract: We present a new measure of legal protection of minority shareholders against expropriation by corporate insiders: the anti-self-dealing index. Assembled with the help of Lex Mundi law firms, the index is calculated for 72 countries based on legal rules prevailing in 2003, and focuses on private enforcement mechanisms, such as disclosure, approval, and litigation, that govern a specific self-dealing transaction. This theoretically grounded index predicts a variety of stock market outcomes, and generally works better than the previously introduced index of anti-director rights.
57 citations
TL;DR: In this article, the authors studied the evolution of legal rules between 1950 and 2000 and found that between the two simple disputes, the formalism of legal procedure did not converge, and possibly diverged, between common law and French civil law countries.
Abstract: Djankov et al. (2003a) propose and measure for 109 countries in the year 2000 an index of formalism of legal procedure for two simple disputes: eviction of a non-paying tenant and collection of a bounced check. For a sub-sample of 40 countries, we compute this index every year starting in 1950, which allows us to study the evolution of legal rules. We find that between 1950 and 2000, the formalism of legal procedure did not converge, and possibly diverged, between common law and French civil law countries. At least in this specific area of law, the results are inconsistent with the hypothesis that national legal systems are converging, and support the view that legal origins exert long lasting influence on legal rules.
46 citations
Posted Content•
TL;DR: This paper argued that the historical origin of a country's laws is highly correlated with a broad range of its legal rules and regulations, as well as with economic outcomes, and they summarized this evidence and attempted a unified interpretation.
Abstract: In the last decade, economists have produced a considerable body of research suggesting that the historical origin of a country’s laws is highly correlated with a broad range of its legal rules and regulations, as well as with economic outcomes. We summarize this evidence and attempt a unified interpretation. We also address several objections to the empirical claim that legal origins matter. Finally, we assess the implications of this research for economic reform.
25 citations