The Economic Consequences Of A Weak Judiciary: Insights From India

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The Economic Consequences Of A Weak Judiciary: Insights From India

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Wolfgang Koehling (The University of Bonn, Germany, Center for Development Research)

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Wolfgang Koehling

Abstract

This paper examines the empirical relationship between the quality of the Indian judiciary and the economic development of the Indian States and Union Territories. It evaluates this causality by analysing the development of the state-level per capita income and poverty rates. I define the quality of the judiciary in terms of: (i) its speed in deciding trials; and, (ii) the predictability of the trial outcome. I measure speed by the backlog in High Courts and predictability through the rate of allowed appeals to the Supreme Court from the High Court. The methodology applied is a cross-regional time-series regression that simultaneously estimates the endogenous relationship between the quality of the judiciary and productive factors, such as agricultural production, private sector development, capital formation, poverty rates, public security and infrastructure. These productive factors in turn influence the level of per capita income, which I model as a function of the size of the agricultural and private services sector, the poverty rate, the transportation infrastructure density, the rental income of land, the fixed capital formation in the industrial sector, the development of the credit markets, the literature rates, and the public safety. The data indicate that a weak judiciary has a negative effect on economic and social development, which leads to: (i) lower per capita income; (ii) higher poverty rates; (iii) lower private economic activity, (iv) poorer public infrastructure; and, (v) higher crime rates and more industrial riots. The results are robust and the correlations are strong and negative. In addition, through a forecasting simulation I have shown that an increase in predictability and a speedier judiciary substantially increase the per capita income growth rate.

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Paper provided by EconWPA in its series Law and Economics with number 0212001.

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Length: 51 pages
Date of creation: 17 Dec 2002
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Handle: RePEc:wpa:wuwple:0212001

Note: Type of Document - Word; prepared on PC; to print on PostScript; pages: 51 ; figures: included
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Find related papers by JEL classification:
K00 - Law and Economics - - General - - - General (including Data Sources and Description)
K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation
O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
H39 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Other
H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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Matthieu Chemin, 2007. "Decoding the Code of Civil Procedure: Do Judiciaries Matter for Growth?," Cahiers de recherche 0726, CIRPEE. [Downloadable!]
Matthieu Chemin, 2007. "The Impact of the Judiciary on Entrepreneurship: Evaluation of Pakistan's Access to Justice Programme," Cahiers de recherche 0727, CIRPEE. [Downloadable!]
Other versions:
- Chemin, Matthieu, 2009. "The impact of the judiciary on entrepreneurship: Evaluation of Pakistan's "Access to Justice Programme"," Journal of Public Economics, Elsevier, vol. 93(1-2), pages 114-125, February. [Downloadable!] (restricted)

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