The Legal Origin of Income Inequality

Abstract

The legal origin movement is implicitly functionalist, while it explicitly prioritizes economic dimensions of development. From this perspective, the empirical findings presented in this paper seem to uncover the existence of a paradox. On the one hand, common law countries are apparently characterized by countless advantages, yet they do not grow faster than civil law countries. On the other hand, common law countries present a more unequal distribution of income, thus suggesting that also from a static perspective there is no a priori reason to prefer a common law system. To further investigate this paradox, we analyze if common law countries are at least characterized by a better kind (earned) of inequalities. However, as the economic distinction between inequalities of opportunities and inequalities of effort is too fragile, this proved to be an impossible task. We are therefore left with the unsolved riddle of the contradicting results obtained by the legal origins literature. From a more practical perspective, the empirical findings seem to disprove the dogma that common law countries are under every condition the perfect benchmark for reforms in developing countries.

Law and inequality: A comparative approach to the distributive implications of legal systems

“…The multitude of articles examining the law-efficiency nexus (see Dam (2004) [8], Roe and Siegel (2009) [36]) and the belief that law need not concern itself with redistribution explain why there is very little research on the link between the legal system and inequality. Only a few articles have empirically (and mostly incidentally) examined this issue (Islam (2016) [17], Easterly (2007) [13]) and two contributions explicitly address this theme: Maggio, Romano, and Troisi (2014) [29] and Ferguson et al (2017) [14]). The former establishes a significant link between legal tradition and the Gini coefficient while the latter concludes that there is no such correlation.…”