Globalization and increasing international flows of goods and capital have created a sense that the importance of individual nation states and the public goods they provide, including law and law enforcement institutions, is in decline. Opting out of domestic legal institutions and into those of a third country or into an "international" architecture have been elevated to important complements, if not substitutes for "good" institutions at home. If traders and investors could indeed effectively opt-out of their home jurisdiction's legal systems, we should observe empirically that the quality of domestic institutions has little impact on international patterns of trade flows. Yet, empirical studies suggest the opposite, namely that a country's domestic legal institutions have strong explanatory power for its integration in international markets.
International Trade Law | Law
Daniel Berkowitz, Johannes Moenius & Katharina Pistor,
Legal Institutions and International Trade Flows,
Mich. J. Int'l L.
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