Advocatus, et non Latro? Testing the Supplier-Induced Demand Hypothesis for the Italian Courts of Justice
AbstractWe explore the causality relationship between litigation rates and the number of lawyers, drawing on an original panel dataset for the 169 Italian first instance courts of justice between 2000 and 2007. In this time bracket, both the number of lawyers and the civil litigation rate sharply increased, and a mandatory minimum fee was in place for lawyers services. We first document that the number of lawyers is positively correlated with different measures of litigation rate. Then, using an instrumental variables strategy, we find that a 10 percent increase of lawyers over population is associated with an increase between 1.6 and 6 percent in civil litigation rates. Our empirical analysis supports the supplier-induced demand (SID) hypothesis for the Italian lawyers: following the sharp increase in the number of lawyers, and in the impossibility of competing in price because of the minimum fee regulation, some lawyers could have opportunistically used their in- formational advantage to induce their clients to bring lawsuits into court more often than it would be optimal if they were acting in the exclusive interest of the clients.
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Bibliographic InfoPaper provided by Collegio Carlo Alberto in its series Carlo Alberto Notebooks with number 250.
Length: 34 pages
Date of creation: 2012
Date of revision:
laywers; litigation rates; credence goods;
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- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
- R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
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