The Rule-of-Law Capital,Growth, and Development

Qixin Zhan (), Junzhu Zhao () and Heng-Fu Zou ()
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Qixin Zhan: School of Economics, Shandong Technology and Business University, Yantai, 264005, China
Junzhu Zhao: China Economics and Management Academy, Central University of Finance and Economics, Beijing, 100081, China

Annals of Economics and Finance, 2025, vol. 26, issue 2, 667-705

Abstract: This paper studies the intricate relationship between investments in the rule-of-law capital and physical production capital within a dynamic model of optimal growth and development. It highlights the mutual influence between institutional changes, such as those in the rule of law, property rights, and legislation systems, and economic performance over time and across different nations. Notably, it sheds light on how the escalating expenses associated with upholding the rule of law, coupled with the swift erosion of rule-of-law capital, can impede long-term economic growth and development. Conversely, the escalating costs and rapid depreciation of physical capital accumulation can significantly undermine the rule of law. In particular, overlegislation is harmful for both the rule of law and economic development. By elucidating these dynamics, this paper offers insights into the complex interplay between legal institutions and economic prosperity.

Keywords: Rule of law; Rule-of-law capital; Growth; Development (search for similar items in EconPapers)
JEL-codes: C61 E27 P16 P48 (search for similar items in EconPapers)
Date: 2025
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Working Paper: The Rule-of-Law Capital, Growth, and Development (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2025:v:26:i:2:zhanzhaozou

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