We analyze the determinants of effective legal institutions (legality) using data from 49 countries. We show that the way the law was initially transplanted and received is a more important determinant than the supply of law from a particular legal family. Countries that have developed legal orders internally, adapted the transplanted law, and/or had a population that was already familiar with basic principles of the transplanted law have more effective legality than countries that received foreign law without any similar predispositions. The transplanting process has a strong indirect effect on economic development via its impact on legality.

Abstract: Corruption and imperfect contract enforcement dramatically reduce international trade. This paper estimates the reduction using a structural model of import demand in which insecurity acts as a hidden tax. We find that inadequate institutions constrain trade as much as tariffs do. We also find that omitting indexes of institutional quality biases other parameter estimates, obscuring a negative relationship between per capita income and the share of total expenditure devoted to traded goods. Finally, we argue that cross-country variation in the effectiveness of institutions and consequent variation in traded goods prices offer a simple explanation of the observed global pattern of trade, in which high-income, capital-abundant countries trade disproportionately with each other. David Tarr and Francis Ng of the World Bank provided tariff data. We also thank our colleagues at Boston College and participants in seminars

this paper is to combine the insights of these two literatures, to identify situations where #Coasian" bargains may not take place in spite of the existence of a simple contractual arrangements to implement it.

In unequal societies, the rich might bene t from shaping economic institutions into their favor. This paper analyzes dynamics of institutional subversion focusing on one particular institution, public protection of property rights. If this institution is imperfect, agents have incentives to invest in private protection of property rights. With economies of scale in private protection, rich agents have a signi cant advantage in such an environment: they could expropriate other agents using their private protection capacities. Ability to maintain private protection system makes the rich natural political opponents of full protection of property rights provided by the state. Such an environment does not allow grass-roots demand to drive development of new market-friendly institutions (such as public protection of property rights). The economy as a whole is stuck in a 'bad ' long-run equilibrium with low growth rate, high inequality, and wide-spread rent-seeking. Russian `oligarchs ' of 90s, few politically powerful agents that controlled large stakes of the newly privatized property, were a major motivating example for this paper.

A game-theoretic model is analyzed for discussing the determination of looting and fighting activity during a civil war between two ethno-regional groups. The Nash equilibrium of this game emphasizes population size, production capacity and productivity, and access to external funding as the main determinants of the size of the armies and of the intensity of looting activity. The Nash equilibrium of the game between the two warlords involves an excessive level of looting. Some lessons are drawn from this framework in order to bring out the minimum redistribution of resources between groups that must take place in a peaceful equilibrium. Keywords: Looting Violence against civilians - JEL Classification : D74-H56-O55.

This paper studies the origins of one of the most basic of property rights, namely, the right of an individual or an organization to the fruits of its labour. My objective is to address the questions of why, when and how this property right can emerge and be made secure. I develop a model of the strategic interaction between two players in the state-of-nature, which is an environment characterized by the absence of any laws and institutions (including property rights and the state). My analyses explores, in particular, the roles of the players' fighting and productive skills on the emergence and security (or otherwise) of this property right.

This paper is concerned with the fundamental issue of the origins (or emergence) of basic property rights such as the right of an individual to the fruits of his labour. I develop a dynamic model of the strategic interaction between two players in the state-of-nature, which is an environment characterized by the absence of any rules, regulations, laws and institutions (including property rights and the state). My objective is to address in a rigorous manner the questions of why, when and how basic property rights can emerge and be made secure. In particular, I explore the roles of the players' fighting and productive skills (or capabilities) on the emergence of secure property rights.

This paper develops a theory of the interaction between appropriative conflict and economic growth. Appropriative conflict, as measured by the diversion of resources, is viewed as the cost of securing effective property rights. We identify conditions under which conflict rises or falls as the rate of economic growth improves. The main implication of the analysis is that if the quality of property rights is sufficiently poor then faster economic growth stimulates the allocation of resources to appropriative activities and might result in decreased social welfare.

Using a general equilibrium model in which people can choose to be either producers or predators, this paper shows that, if the technology of predation is sufficiently effective, then having a king, who can enforce a collective choice to al locate resources to secure producers claims to their product, is better for everyone, including both producers and potential predators, than not having a king, even though the king maximizes the consumption of a ruling elite. This result obtains because a more effective technology of predation both makes the social value of deterring predation larger and constrains the proprietary state more tightly.

We analyze how economic shocks and policies affect the intensity of social conflict. We show that not all shocks that could make society richer reduce conflict. In our model, positive shocks to labor intensive industries diminish social conflict, while positive shocks to capital intensive industries increase it. The key requirement is that appropriation activities be more labor intensive than the economy. Our theory explains empirical patterns of conflict, for example, the positive association between crime and inequality, and the curse of natural resources. Including appropriation activities into a canonic general equilibrium model helps explain why reforms that appear efficiency-enhancing a priori may be delayed and become unpopular when implemented, and why societies may sympathise with some populist policies and seemingly inefficient redistribution.