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Journal of Law, Economics, and Organization Advance Access published online on June 26, 2009
Journal of Law, Economics, and Organization, doi:10.1093/jleo/ewp010
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© The Author 2009. Published by Oxford University Press on behalf of Yale University. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org

Is the World Flat? Country- and Firm-Level Determinants of Law Compliance

Alberto Chong*

Inter-American Development Bank

Mark Gradstein**

Ben Gurion University

* Research Department, Inter-American Development Bank, Washington DC, 20577. Email: albertoch{at}iadb.org.

** Department of Economics, Ben-Gurion University, CEPR, CESifo, IZA, Beer-Sheva 84105, Israel. Email: grade{at}bgu.ac.il.

This research revisits the effects of a country's institutional framework on individual firms' behavior, focusing, in particular, on firms' propensity to comply with legal rules. We purport to explain the variation in compliance with legal rules by employing a rich data set on thousands of firms from dozens of countries. We find that most of the variation emanates from countrywide differences in institutional quality, although various firm characteristics play a role as well. We also find indications that differences across countries diminish with the level of development. (JEL D21, K42, O17, O57)


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