This literature review examines the critical role of the rule of law in shaping economic performance, integrating historical, microeconomic, and macroeconomic perspectives with empirical evidence. The analysis highlights that legal predictability, contract enforcement, and secure property rights foster investment, innovation, and productivity, while also stabilising macroeconomic outcomes.
Historical evidence from the United Kingdom illustrates the foundational role legal institutions have played in enabling industrialisation and sustained economic growth. The effects of the rule of law are heterogeneous: they are particularly strong in low- and middle-income countries, serving as growth accelerators, and acting more often as stabilisers in advanced economies. However, even in developed economies, the rule of law remains important. For example, it contributes to catch-up growth and convergence within regional trade blocs, and guards against productivity losses insofar as individuals have effective access to justice when they encounter legal problems. The relationship between the rule of law and economic performance is bidirectional, as economic development can lead to states reforming and strengthening their legal institutions. Moreover, the rule of law interacts with other governance dimensions such as corruption control, bureaucratic quality and democracy, producing complementary effects that enhance economic outcomes. Despite robust evidence, challenges remain in investigating these relationships. Overall, the rule of law is both a driver of economic prosperity and a reflection of societal commitment to fairness and institutional credibility, serving as a cornerstone of sustainable development.
Related publications and coverage
Jan van Zyl Smit, Julinda Beqiraj and Ian Jeffrey (Chief Executive, Law Society of England and Wales), "The Rule of Law and the Economy: How the Rules of the Game Enable Prosperity" Bingham Centre comment piece, 11 March 2026
Jonathan Goldsmith, "The economic riddle of the rule of law" Law Society Gazette, 11 March 2026
