Resource information
This paper develops a framework and some
hypotheses regarding the impact of local-level, informal
legal institutions on three economic outcomes: aggregate
growth, inequality, and human capabilities. It presents a
set of stylized differences between formal and informal
legal justice systems, identifies the pathways through which
formal systems promote economic outcomes, reflects on what
the stylized differences mean for the potential impact of
informal legal institutions on economic outcomes, and looks
at extant case studies to examine the plausibility of the
arguments presented. The paper concludes that local-level,
informal legal institutions: (i) can support social
substitutes for the enforcement of contracts, though these
substitutes tend to be limited in range and scale; (ii) are
flexible and could conceivably be adapted to serve the
interests of the poor and marginalized if supportive
organizational and social resources could be brought to
buttress the legal claims of the disempowered; and (iii) are
more likely to support personal integrity rights than the
positive liberties that are also constitutive of development
as freedom.
