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Judicial quality, contract intensity and exports: Firm-level evidence

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  • Wang, Yongjin
  • Wang, Yanling
  • Li, Kunwang

Abstract

Judicial quality affects firms' exports through its efficiency in settling business contract disputes (transaction costs). Firms in regions with better judicial quality will have a comparative advantage in exporting the goods that source heavily relationship-specific intermediate inputs (contract-intensive), due to cost saving from efficient dispute settlement system. We study this issue using export data of over 77,000firms across 30 provinces in China. We explicitly control for firm heterogeneity of self-selection into exporters, and firm heterogeneity in their responses to judicial quality. We find that firms operating in provinces with better judicial quality export more products that require relationship-specific intermediate inputs, and judicial quality is most important for foreign-owned firms.

Suggested Citation

  • Wang, Yongjin & Wang, Yanling & Li, Kunwang, 2014. "Judicial quality, contract intensity and exports: Firm-level evidence," China Economic Review, Elsevier, vol. 31(C), pages 32-42.
    • Handle: RePEc:eee:chieco:v:31:y:2014:i:c:p:32-42
    DOI: 10.1016/j.chieco.2014.08.002
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    Cited by:

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    7. Huiwen Lai & Keith E. Maskus & Lei Yang, 2018. "Intellectual Property Enforcement, Exports and Productivity: Evidence from China," RSCAS Working Papers 2018/39, European University Institute.
    8. Alexeev, Michael & Chernyavskiy, Andrey, 2021. "The impact of institutional quality on manufacturing sectors: A panel data analysis," Economic Systems, Elsevier, vol. 45(3).
    9. Eppinger, Peter & Kukharskyy, Bohdan, 2021. "Contracting institutions and firm integration around the world," European Economic Review, Elsevier, vol. 137(C).
    10. Santosh Adhikari & Michael Alexeev, 2022. "Judicial efficiency and the comparative disadvantage of Indian manufacturing," Review of Development Economics, Wiley Blackwell, vol. 26(1), pages 375-404, February.
    11. Falavigna, G. & Ippoliti, R., 2021. "Reform policy to increase the judicial efficiency in Italy: The opportunity offered by EU post-Covid funds," Journal of Policy Modeling, Elsevier, vol. 43(5), pages 923-943.
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    13. Eppinger, Peter S. & Kukharskyy, Bohdan, 2017. "Contracting institutions and firm boundaries," University of Tübingen Working Papers in Business and Economics 100, University of Tuebingen, Faculty of Economics and Social Sciences, School of Business and Economics.
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    17. Mamadou Bah & Henri Atangana Ondoa & Koffi Délali Kpognon, 2021. "Effects of governance quality on exports in Sub-Saharan Africa," International Economics, CEPII research center, issue 167, pages 1-14.
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    More about this item

    Keywords

    Judicial quality; Contract intensity; Firm exports;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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