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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:

    1. Chakraborty, Pavel, 2016. "Judicial quality and regional firm performance: The case of Indian states," Journal of Comparative Economics, Elsevier, vol. 44(4), pages 902-918.
    2. Nunn, Nathan & Trefler, Daniel, 2014. "Domestic Institutions as a Source of Comparative Advantage," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 263-315, Elsevier.
    3. Yixiao Zhou, 2014. "Role of Institutional Quality in Determining the R&D Investment of Chinese Firms," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 22(4), pages 60-82, July.
    4. 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.
    5. Michael Alexeev & Andrey Chernyavskiy, 2019. "The impact of institutional quality on manufacturing sectors in Russia: panel data analysis," CAEPR Working Papers 2019-004, Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington.

    More about this item

    Keywords

    Judicial quality; Contract intensity; Firm exports;

    JEL classification:

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

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