De Jure and De Facto Institutions: Implications for Law and Economics

The paper contributes to the debate on economic effects of law by extending the focus to the de jure - de facto distinction. Identification of economic effects of legal rules has been the focus of law and economics for decades. However, the literature on the subject relates relatively rarely to de jure provisions; rather it deals with the way in which these rules de facto function in legal practice. The authors refer to the conceptualization of de jure and de facto institutions, as well as their interrelationships, and investigate the applications of this perspective to the literature on economic effects of law. Specifically, they focus on constitutional-legal institutions, including judicial independence, protection of constitutional rights, central bank independence, fiscal rules, independence of regulatory agencies, and protection of property rights. Their conclusions concern the validity of research on economic consequences of law and provide lessons for its further development.