Does Arbitration Blossom when State Courts are Bad?
AbstractIt is often conjectured that non-state dispute resolution blossoms when state courts are not independent or are perceived as low-quality courts. This conjecture implies a substitutive relationship between state and non-state dispute resolution. An alternative hypothesis argues that both the quality and the frequency of use of these two alternative mechanisms are complementary: societies with high-quality state courts would also be able to provide high-quality non-state dispute resolution. This is the first study that puts these hypotheses to an empirical test. It turns out that the lower the perceived quality of state courts, the less frequently conflicting firms resort to them. Second, firms in common-law countries turn away from state courts significantly more often than firms in civil-law countries. This result sheds doubt on the robustness of results generated within the legal traditions literature. Finally, in states that have created the preconditions for arbitration, businesspeople resort significantly more often to state courts. We interpret this as evidence in favor of the complementarity hypothesis.
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Bibliographic InfoPaper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 200906.
Length: 33 pages
Date of creation: 2009
Date of revision:
Publication status: Forthcoming in
Alternative Dispute Revolution; Quality of Justice; Judicial Independence; Corruption; Private Provision of Public Goods.;
Find related papers by JEL classification:
- H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-01-31 (All new papers)
- NEP-LAW-2009-01-31 (Law & Economics)
- NEP-PBE-2009-01-31 (Public Economics)
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