Publications

2008
Djankov, Simeon, Oliver Hart, Caralee McLiesh, and Andrei Shleifer. 2008. “Debt Enforcement Around the World.” Journal of Political Economy 116 (6): 1105-1150. Abstract

Insolvency practitioners from 88 countries describe how debt enforcement will proceed against an identical hotel about to default on its debt. We use the data on time, cost, and the likely disposition of the assets (preservation as a going concern vs. piecemeal sale) to construct a measure of the efficiency of debt enforcement in each country. This measure is strongly correlated with per capita income and legal origin and predicts debt market development. Several characteristics of debt enforcement procedures, such as the structure of appeals and avail- ability of floating charge finance, influence efficiency.

PDF Data
Shleifer, Andrei, Simeon Djankov, Rafael LaPorta, and Florencio Lopez-de-Silanes. 2008. “The Law and Economics of Self-Dealing.” Journal of Financial Economics 88 (3): 430-465. Abstract

We present a new measure of legal protection of minority shareholders against expropriation by corporate insiders: the anti-self-dealing index. Assembled with the help of Lex Mundi law firms, the index is calculated for 72 countries based on legal rules prevailing in 2003, and focuses on private enforcement mechanisms, such as disclosure, approval, and litigation, that govern a specific self-dealing transaction. This theoretically grounded index predicts a variety of stock market outcomes, and generally works better than the previously introduced index of anti-director rights.
Copyright 2008 Elsevier B.V. All rights reserved.

PDF Data
LaPorta, Rafael, Florencio Lopez-de-Silanes, and Andrei Shleifer. 2008. “The Economic Consequences of Legal Origins.” Journal of Economic Literature 46 (2): 285-332. Abstract

In the last decade, economists have produced a considerable body of research suggesting that the historical origin of a country’s laws is highly correlated with a broad range of its legal rules and regulations, as well as with economic outcomes. We summarize this evidence and attempt a unified interpretation. We also address several objections to the empirical claim that legal origins matter. Finally, we assess the implications of this research for economic reform.

PDF Data
Mullainathan, Sendhil, Joshua Schwartzstein, and Andrei Shleifer. 2008. “Coarse Thinking and Persuasion.” Quarterly Journal of Economics 123 (2): 577-619. Abstract

We present a model of uninformative persuasion in which individuals “think coarsely”: they group situations into categories, and apply the same model of inference to all situations within a category. Coarse thinking exhibits two features that persuaders take advantage of: (i) transference, whereby individuals transfer the informational content of a given message from situations in a category where it is useful to those where it is not, and (ii) framing, whereby objectively useless information influences individuals’ choice of category. The model sheds light on uninformative advertising and product branding, as well as on some otherwise anomalous evidence on mutual fund advertising.

PDF
Gennaioli, Nicola, and Andrei Shleifer. 2008. “Judicial Fact Discretion.” Journal of Legal Studies 37 (1): 1-35. Abstract

Following legal realists, we model the causes and consequences of trial judges exercising discretion in finding facts in a trial. We identify two motivations for the exercise of such discretion: judicial policy preferences and judges’ aversion to reversal on appeal when the law is unsettled. In the latter case, judges exercising fact discretion find the facts that fit the settled precedents, even when they have no policy preferences. In a standard model of a tort, judicial fact discretion leads to setting of damages unpredictable from true facts of the case but predictable from knowledge of judicial preferences, distorts the number and severity of accidents, and generates welfare losses. It also encourages litigants to take extreme positions in court and raises the incidence of litigation relative to settlement, especially in new and complex disputes for which the law is unsettled.

PDF
2007
Glaeser, Edward L, Giacomo AM Ponzetto, and Andrei Shleifer. 2007. “Why Does Democracy Need Education?” Journal of Economic Growth 12 (2): 77-99. Abstract

Across countries, education and democracy are highly correlated. We motivate empirically and then model a causal mechanism explaining this correlation. In our model, schooling teaches people to interact with others and raises the benefits of civic participation, including voting and organizing. In the battle between democracy and dictatorship, democracy has a wide potential base of support but offers weak incentives to its defenders. Dictatorship provides stronger incentives to a narrower base. As education raises the benefits of civic engagement, it raises participation in support of a broad-based regime (democracy) relative to that in support of a narrow-based regime (dictatorship). This increases the likelihood of successful democratic revolutions against dictatorships, and reduces that of successful anti-democratic coups.

PDF
Gennaioli, Nicola, and Andrei Shleifer. 2007. “Overruling and the Instability of Law.” Journal of Comparative Economics 35 (2): 309-328. Abstract

We investigate the evolution of common law under overruling, a system of precedent change in which appellate courts replace existing legal rules with new ones. We use a legal realist model, in which judges change the law to reflect their own preferences or attitudes, but changing the law is costly to them. The model’s predictions are consistent with the empirical evidence on the overruling behavior of the US Supreme Court and appellate courts. We find that overruling leads to unstable legal rules that rarely converge to efficiency. The selection of disputes for litigation does not change this conclusion. Our findings provide a rationale for the value of precedent, as well as for the general preference of appellate courts for distinguishing rather than overruling as a law-making strategy. Journal of Comparative Economics 35 (2) (2007) 309–328. University of Stockholm, 10691 Stockholm, Sweden; Harvard University, M9 Littauer Center, Cambridge, MA 02138, USA.
© 2007 Association for Comparative Economic Studies. Published by Elsevier Inc. All rights reserved.

PDF
Djankov, Simeon, Caralee McLiesh, and Andrei Shleifer. 2007. “Private Credit in 129 Countries.” Journal of Financial Economics 12 (2): 77-99. Abstract

We investigate cross-country determinants of private credit, using new data on legal creditor rights and private and public credit registries in 129 countries. Both creditor protection through the legal system and information-sharing institutions are associated with higher ratios of private credit to gross domestic product, but the former is relatively more important in the richer countries. An analysis of legal reforms shows that credit rises after improvements in creditor rights and in information sharing. Creditor rights are remarkably stable over time, contrary to the hypothesis that legal rules are converging. Finally, legal origins are an important determinant of both creditor rights and information- sharing institutions. The analysis suggests that public credit registries, which are primarily a feature of French civil law countries, benefit private credit markets in developing countries. Copyright 2006 Elsevier B.V. All rights reserved.

PDF Data
Gennaioli, Nicola, and Andrei Shleifer. 2007. “The Evolution of Common Law.” Journal of Political Economy 115 (1): 43-68.
PDF
2006
LaPorta, Rafael, Florencio Lopez-de-Silanes, and Andrei Shleifer. 2006. “What Works in Securities Laws?” Journal of Finance 61 (1): 1-32. Abstract

We examine the effect of securities laws on stock market development in 49 countries. We find little evidence that public enforcement benefits stock markets, but strong evidence that laws mandating disclosure and facilitating private enforcement through liability rules benefit stock markets.

PDF Harvard University Securities Law Project Data
2005
Mulligan, Casey, and Andrei Shleifer. 2005. “The Extent of the Market and the Supply of Regulation.” Quarterly Journal of Economics 120 (4): 1445-1473. Abstract

We present a model in which setting up and running a regulatory institution takes a fixed cost. As a consequence, the supply of regulation is limited by the extent of the market. We test three implications of this model. First, jurisdictions with larger populations affected by a given regulation are more likely to have it. Second, jurisdictions with lower incremental fixed costs of introducing and ad- ministering new regulations should regulate more. This implies that regulation spreads from higher to lower population jurisdictions, and that jurisdictions that build up transferable regulatory capabilities should regulate more intensely. Consistent with the model, we find that higher population U. S. states have more pages of legislation and adopt particular laws earlier in their history than do smaller states. We also find that the regulation of entry, the regulation of labor, and the military draft are more extensive in countries with larger populations, as well as in civil law countries, where we argue that the incremental fixed costs are lower.

PDF Data
Shleifer, Andrei. 2005. “Understanding Regulation.” European Financial Management 11 (4): 439-451.
PDF
Treisman, Daniel, and Andrei Shleifer. 2005. “A Normal Country: Russia after Communism.” Journal of Economic Perspectives 19 (1): 151-174.
PDF
Mullainathan, Sendhil, and Andrei Shleifer. 2005. “The Market for News.” American Economic Review 95 (1): 1031-1053. Abstract

We investigate the market for news under two assumptions: that readers hold beliefs which they like to see confirmed, and that newspapers can slant stories toward these beliefs. We show that, on the topics where readers share common beliefs, one should not expect accuracy even from competitive media: competition results in lower prices, but common slanting toward reader biases. On topics where reader beliefs diverge (such as politically divisive issues), however, newspapers segment the market and slant toward extreme positions. Yet in the aggregate, a reader with access to all news sources could get an unbiased perspective. Generally speaking, reader heterogeneity is more important for accuracy in media than competition per se. (JEL D23, L82)

PDF
Mulligan, Casey, and Andrei Shleifer. 2005. “Conscription as Regulation.” American Law and Economics Review 7 (1): 85-111.
PDF Data
Glaeser, Edward L, and Andrei Shleifer. 2005. “The Curley Effect.” Journal of Law, Economics, and Organization 21 (1): 1-19. Abstract

James Michael Curley, a four-time mayor of Boston, used wasteful redistribution to his poor Irish constituents and incendiary rhetoric to encourage richer citizens to emigrate from Boston, thereby shaping the electorate in his favor. As a consequence, Boston stagnated, but Curley kept winning elections. We present a model of using redistributive politics to shape the electorate, and show that this model yields a number of predictions opposite from the more standard frameworks of political competition, yet consistent with empirical evidence.

PDF
Barberis, Nicholas, Andrei Shleifer, and Jeffrey Wurgler. 2005. “Comovement.” Journal of Financial Economics 75 (2): 283-317. Abstract

Building on Vijh (Rev. Financial Stud. 7 (1994)), we use additions to the S&P 500 to distinguish two views of return comovement: the traditional view, which attributes it to comovement in news about fundamental value, and an alternative view, in which frictions or sentiment delink it from fundamentals. After inclusion, a stock’s beta with the S&P goes up. In bivariate regressions which control for the return of non-S&P stocks, the increase in S&P beta is even larger. These results are generally stronger in more recent data. Our findings cannot easily be explained by the fundamentals-based view and provide new evidence in support of the alternative friction- or sentiment-based view.
Copyright 2004 Elsevier B.V. All rights reserved.

PDF
A Normal Country: Russia after Communism
Shleifer, Andrei. 2005. A Normal Country: Russia after Communism. Harvard University Press. Publisher's Version
2004
Botero, Juan, Simeon Djankov, Rafael LaPorta, Florencio López-de-Silanes, and Andrei Shleifer. 2004. “The Regulation of Labor.” Quarterly Journal of Economics 119 (4): 1339-1382. Abstract

We investigate the regulation of labor markets through employment, collective relations, and social security laws in 85 countries. We find that the political power of the left is associated with more stringent labor regulations and more generous social security systems, and that socialist, French, and Scandinavian legal origin countries have sharply higher levels of labor regulation than do common law countries. However, the effects of legal origins are larger, and explain more of the variation in regulations, than those of politics. Heavier regulation of labor is associated with lower labor force participation and higher unemployment, especially of the young. These results are most naturally consistent with legal theories, according to which countries have pervasive regulatory styles inherited from the transplantation of legal systems.

PDF Data (Labor Regulations for 85 countries)
Glaeser, Edward L, Rafael LaPorta, Florencio López-de-Silanes, and Andrei Shleifer. 2004. “Do Institutions Cause Growth?” Journal of Economic Growth 9 (3): 271-303.
Data(1) Data(2) PDF

Pages