CORPORATE CHARTERING: AN EXPLORATION IN THE ECONOMICS OF LEGAL CHANGE

During the nineteenth and early twentieth centuries, the market for corporate charters was deregulated as states replaced special chartering with incorporation under general laws. This paper explores the pattern of deregulation across states within the context of the interest-group theory of government. The empirical results show that legal change tended to occur first in states where the stake in deregulation was greatest, and where the costs of lobbying for "liberal" corporation codes were low. Innovations in law can thus be explained by the same benefit-cost calculus that describes economic innovation.