The role of Constitutions in economic growth

Economic Growth

Many people in the academy is trying to link the economic growth and development with the nature of the legal system. They take as a source of study, the most important legal scheme of any nation, that is, the constitution.

The fact, found by de Vanssay Spindler 1994 is that no matter how deep is the level of specificity in the written laws in a constitution, the crucial feature of any legal system is the people supposed to enforce the laws and exercise the jurisprudence. Those who hold the public and political power and enforce the legal codes are the most important element in the whole system.

No doubt this is good news because legislators and politicians rarely understand the correct application of policies and regulations and often state wrong or incomplete laws in the constitution. Economic theory is seen suspiciously and few times It’s more useful conclusions taken into account.




The elements always present in affluent societies involve education levels, economic freedom, population growth and saving ratios. According to the aforementioned authors, they account for more than 75% of the cross-country variation in per capita income.

Developing countries politicians have a poor grasp on these elements and even they maintain and believe in good intentions, their legislative efforts end in mere wish lists which never get any concrete result in the desired direction.

Interestingly, there are more serious studies about law codes tracing differences down to the origin of the modern nations. One of them, extremely useful is Beck Demirgüc-Kunt Levine 2003 which states the hypothesis that the origin of the legal code determines future economic outcome. Nations sharing the common law origin (English) perform better than civil law (French). The former is based on a strong private property protection system, the later rests its core on the state as source of justice.

References:

de Vanssay, Xavier, Spindler, Z.A. 1994 Freedom and growth: Do constitutions matter? Public Choice 78: 359-372

Beck, Thorsten, Demirgüc-Kunt, Asli, Levine, Ross. 2003. Law, endowments, and finance. Journal of Financial Economics 70: 137-181

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