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Legal Finance
This document discusses two theories for why legal origin influences financial development: 1) The "political" channel argues that legal traditions differ in the priority they give to private property rights versus state power, and common law traditions better protect private contracting rights and financial development. 2) The "adaptability" channel holds that legal traditions differ in their ability to adapt efficiently to changing economic conditions, and common law systems can more flexibly evolve case-by-case while civil law systems rely more on statutory changes. The document assesses the empirical validity of these two channels influencing the relationship between legal origin and financial development.
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