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Journal of Economic Literature: Vol. 47 No. 4 (December 2009)

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Law and Finance "at the Origin"

Article Citation

Malmendier, Ulrike. 2009. "Law and Finance "at the Origin"." Journal of Economic Literature, 47(4): 1076-1108.

DOI: 10.1257/jel.47.4.1076

Abstract

What are the key determinants of financial development and growth? A large literature debates the relative importance of countries' legal and political environment. In this paper, I present evidence from ancient Rome, where an early form of shareholder company, the societas publicanorum, developed. I show that the societas publicanorum flourished in a legally underdeveloped but politically supportive environment (Roman Republic) and disappeared when Roman law reached its height of legal sophistication but the political environment grew less supportive (Roman Empire). In the Roman case, legal development appears to have mattered little as long as the law as practiced was flexible and adapted to economic needs. The "law as practiced," in turn, reflected prevalent political interests. After discussing parallels in more recent history, I provide a brief overview of the literature on law and finance and on politics and finance. The historical evidence suggests that legal systems may be less of a technological constraint for growth than previously thought -- at least "at the origin." (JEL D72, K10, N23, N43)

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Authors

Malmendier, Ulrike (U CA, Berkeley)

JEL Classifications

D72: Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
K10: Basic Areas of Law: General (Constitutional Law)
N23: Economic History: Financial Markets and Institutions: Europe: Pre-1913
N43: Economic History: Government, War, Law, International Relations, and Regulation: Europe: Pre-1913


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