Openness and institutional change: the case of the Rule of Law

Project lead: Richard Frensch (IOS), Herbert Küpper (IOR) and Friedrich-Christian Schröder (IOR)
Researchers: Miriam Frey (IOS), Tina de Vries (IOR), and Stela Ivanova (IOR)
Project duration: June 2013 – May 2017
Funding: Bayerischer Forschungsverbund ForChange

Recently, economists have rediscovered their interest in institutions and the legal profession has noticed that their understanding of legal institutions may profit from economic research. Consequently, lawyers from the IOR (Institut für Ostrecht, Regensburg) and IOS economists join forces in an interdisciplinary project to study whether external liberalizations can impact the design of legal institutions. We concentrate on the Rule of Law (as conceptualized by economists), especially on contract stability and contract enforcement. Except for a number of related research questions (such as on changes in the institutions governing contract enforcement and the de-linking of Rule of Law concepts as economists use it from Anglo-Saxon legal traditions) we also want to study the potential impact of external liberalizations on the quality of environmental standards.

We study adjustments of legal institutions in reaction to technology induced globalization processes using information on complex production processes that depend on security and enforceability of contracts and are potentially sensitive to offshoring tendencies. As we do so in the context of changes in political institutions against the background of post-socialist transition in Central and Eastern Europe, we look forward to demonstrate that country-specific institutions do not change mechanically subject to technology induced globalization. Rather, we expect to identify degrees of freedom for societies and consequently room for political decisions in this respect.

In terms of expected results from the project, we first anticipate to be able to demonstrate that concepts of the Rule of Law as perceived in economics are indeed dominated by Anglo-Saxon legal traditions. We are also confident that it will be possible to remove this bias, making room for the potential advantages of using continental legal traditions in studying the Rule of Law. We expect to be able to show that external liberalizations have even comparatively short-run impacts on the Rule of Law. We have no clear-cut prior expectation on the environmental standards reaction to external liberalizations.

Both IOR and IOS have been granted a 50 per cent research post each for a period of four years within the Bavarian ForChange Research program.