The Impact of Legal Systems on Trade Flows in Western and Eastern Europe - An EmpiricalEvaluation

摘要

This article examines the effect of legal improvement and convergence on international trade in Europe, The underlying idea is that contract erforcement is better when two countries have more similar (and stricter) legal systems, and it affects trade flows positively. We test the hypothesis that, if the improvement in the quality of the legal system of one country/region is biased totvard another one, this acts to increase trade between them. It respectively leads to trade diversion aivay from a third country/region that does not improve its legal system. The accession into the EU (or lack thereof) of Central and Eastern European and Former Soviet Union countries provides a good "natural" experiment for examining this prediction, as some of them are required to bring their laws into conformity with the European Union system of laws, while others are not. The empirical strategy is to look at East-West trade flows during the period of this legal convergence to assess the effect of biased legal reforms on trade flows. There is convincing empirical evidence in support of the main hypothesis that legal improvement and convergence bring trade creation.