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The Economics of Legal Harmonization

Author

Listed:
  • Emanuela Carbonara

    (University of Bologna)

  • Francesco Parisi

    (George Mason University School of Law)

Abstract
The global legal landscape is undergoing substantial transformations, adapting to an increasingly global market economy. Differences between legal systems create obstacles to transnational commerce. Countries can reduce these legal differences through non-cooperative and cooperative adaptation processes, fostering networks of trade that link diverse legal traditions. In this article, we study the process of legal adaptation, looking at non-cooperative and cooperative solutions that can alternatively lead to legal transplantation, harmonization and unification. The presence of adaptation and switching costs renders unification extremely difficult. In the general case, cooperative solutions reduce differences to a greater extent than non-cooperative solutions, but rarely lead to complete legal unification. We consider the case of endogenous switching costs and show that when countries have the possibility to reduce their own switching costs to facilitate harmonization, they may actually choose to raise them. This may lead to the paradox that countries engaging in cooperative harmonization end up with less harmonization than those that pursued non-cooperative strategies. This explains why differences are often bridged by private codifications and by the evolving norms of the lex mercatoria.

Suggested Citation

  • Emanuela Carbonara & Francesco Parisi, "undated". "The Economics of Legal Harmonization," German Working Papers in Law and Economics 2006-1-1149, Berkeley Electronic Press.
    • Handle: RePEc:bep:dewple:2006-1-1149
    Note: oai:bepress:
    as

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    File URL: http://www.bepress.com/cgi/viewcontent.cgi?article=1149&context=gwp
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    References listed on IDEAS

    as
    1. Vincy Fon & Francesco Parisi, "undated". "Stability and Change in International Customary Law," American Law & Economics Association Annual Meetings 1021, American Law & Economics Association.
    2. Fudenberg, Drew & Tirole, Jean, 1984. "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review, American Economic Association, vol. 74(2), pages 361-366, May.
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    4. Thomson, William, 1994. "Cooperative models of bargaining," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 2, chapter 35, pages 1237-1284, Elsevier.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Legal Harmonization; Legal Transplantation; Transnational Contracts; Legal Change;
    All these keywords.

    JEL classification:

    • K10 - Law and Economics - - Basic Areas of Law - - - General (Constitutional Law)
    • K33 - Law and Economics - - Other Substantive Areas of Law - - - International Law
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General

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