In this thesis, I analyse the role of institutions on economic development and the environment. More specifically, I study how changes in the legal framework of a society affect economic development. By examining the relationship between legal institutions and economic variables in three countries in the developing world, I attempt to shed light on three general questions: (i) how do economic agents’ incentives respond to changes in the set of regulations they are embedded?; (ii) what are the economic reasons behind such changes?; and (iii) how do different legal regimes interact? In chapter 2, I study the relationship between environmental regulation and spatial development in China. My results suggest that the introduction of regulation influences spatial development by reducing geographical disparities in the country. In chapter 3, I study the economic reasons that motivate a reduction in the discretionary power of environmental regulators in South Africa. I show that a more heterogeneous body of inspectors favours less discretionary power and, eventually, decreases firms’ perceived corruption. Finally, in chapter 4, I study the interaction between two legal regimes in post-conflict Sierra Leone. I argue that legal competition might reduce the rents extracted by legal authorities from the populace. Overall, my thesis shows that institutional change (i) might generate unforeseen economic consequences, (ii) influences and is influenced by the incentives agents face and (iii) might be the result of economic competition.