The latest Economic Development Bulletin has been released by the Cato Institute. The Path to Development: When Does the Legal Environment Become Critical? (.pdf) was written by Jim Gwartney and me. A quick quote:

People who live in countries where property rights are insecure, contracts poorly enforced, and legal and regulatory verdicts auctioned off to the highest bidder will not be integrated into the worldwide market network. Without rule of law, the benefits from trade will be limited to those derived from personalized exchange, trade among family members and persons in the local neighborhood or village who know each other or at least know about each other. Here, trade is based on personal knowledge, and contract enforcement is achieved through family ties and social pressures. However, the benefits derived from personalized exchange will be small compared with those available through a depersonalized market network based on enforceable contracts and rule of law.

Subscribe (free) to the Economic Development Bulletin here.