Document Type

Article

Publication Date

2006

Abstract

Arguably the most important social science research of the past decade has centered on comparative law and economics. In a celebrated series of articles, the economists Rafael La Porta, Florencio Lopez-de-Silanes, Andrei Shleifer, and intermittent collaborators have explored empirically how a country's legal origin- English common law, French civil law, Germanic code, Scandinavian law, or Soviet socialist law-affects its subsequent institutional and economic development. The common law emerges as the hero of this analysis: Compared with other countries and especially with civil law countries, common law bearers have, ceteris paribus, better legal protection of shareholders and creditors;1 greater judicial independence and economic freedom;2 less formalized, shorter, fairer, more consistent dispute resolution procedures;3 less politicized law enforcement;4 lower barriers to new business formation;5 and more efficient bureaucracies.6 Taken together, these studies offer a remarkably broad argument for the common law being a driver of, or at least uniquely consonant with, good government. On the sweep and strength of these findings, La Porta and colleagues have been cited more times since 1997 than any other economists, and policymakers worldwide have been scouring their articles for usable insights.7

In a new study entitled The Regulation of Labor, the authors (with Juan Botero now headlining) push their research in a provocative new direction.8 While their previous work had focused on corporate law and on courts, here the authors investigate a novel domain. Using original data compiled on eighty-five countries, Botero and colleagues (Botero et al.) examine the historical determinants of employment, collective relations, and social security laws. They find that legal origin is a stronger predictor of all of these than political or economic variables, with common law associated with the lowest levels of regulation. Legal institutional theory, they conclude, better explains the development of national labor laws than political power or efficiency theories.

Moving labor market regulation from the left-hand to the righthand side of the equation, Botero et al. then show that heavier regulation corresponds to lower labor force participation and higher unemployment, especially for the young. Coupled with the legal origins evidence, this result implies that the common law leads not only to less intensive worker protection, but also to superior labor market outcomes. The Regulation of Labor thus extends La Porta and colleagues' research in at least three significant ways, providing further evidence of: (1) legal origin's lasting and profound impact on present-day outcomes, (2) the common law's uniquely beneficent effects, and (3) "regulatory complementarity," whereby countries' regulatory styles remain consistent across substantive areas of law.9 The study's remarkable dataset and its anti-regulation conclusions, meanwhile, may set the agenda for comparative labor law empirical research for years to come.10

The problem, this paper will argue, is that The Regulation of Labor's methodological weaknesses severely undermine its putative contributions. Many scholars have voiced concerns about La Porta and colleagues' econometric approach.11 I join this chorus and seek to augment it by providing, in Sections I and II, one of the first systematic methodological critiques of their study 2 and by situating this critique, in Section III, in the broader context of empirical legal scholarship. My critique is able to avoid being highly technical because the methodological problems here are fundamental. Nevertheless, I write this paper not from a place of ressentiment, but from a place of admiration; The Regulation of Labor, like all of these authors' works, is as impressive as it is important. More, it is a signal example of the intertwined potentialities and problematics of comparative law and economics.

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