Legal reform in the presence of a living custom: an economic approach.

Empowerment of disadvantaged groups of population is a key issue in development. One major difficulty in implementing progressive legal reforms arises from the persistent and contrary influence of custom. In this paper, we present a simple theoretical framework that analyzes how customary rules evolve under the impact of a change in formal law. This evolution is ultimately caused by a modification of relative costs and benefits of exiting the community by members of the disadvantaged groups as a result of change in the law. We also describe how the welfare of these groups is affected and provide illustrative evidence.