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Industry vs services: do enforcement institutions matter for specialization patterns? disaggregated evidence from Spain

Author

Listed:
  • Juan S. Mora-Sanguinetti

    (Banco de España-Eurosystem)

  • Rok Spruk

    (Faculty of Economics, university of Ljubljana–Laibach)

Abstract

We exploit historical differences in foral law to consistently estimate the contribution of the quality of enforcement institutions to economic specialization across Spanish provinces in the period 1999-2014. The distribution of economic activity in Spain as of today shows a strong pattern of geographical specialization. Regions less specialized in manufacturing (industry) and oriented to services sectors (Andalusia, Extremadura) in the south are compared with industrialized/manufacturing regions in the north such as the Basque Country, Navarre or Aragon. We construct province-level congestion rates across three different jurisdictions (civil, labor and administrative) from real judicial data measuring the performance of the Spanish judicial system over time, and estimate the effect of judicial efficacy on the share of manufacturing and services in the total output. Using a variety of estimation techniques, the evidence unveils strong and persistent effects of judicial efficacy on province-level economic specialization with notable distributional differences. The provinces with a historical experience of foral law are significantly more likely to have more efficient enforcement institutions at the present day. In turn, greater judicial efficacy facilitates specialization in high-productivity manufacturing while greater judicial inefficacy encourages service-intensive specialization. The effect of judicial efficacy on economic specialization does not depend on confounders, holds across a number of specification checks and appears to be causal. Lastly, the three jurisdictions seem relevant to explain specialization, although the administrative jurisdiction appears to have a more pronounced impact than the labor or civil jurisdictions.

Suggested Citation

  • Juan S. Mora-Sanguinetti & Rok Spruk, 2018. "Industry vs services: do enforcement institutions matter for specialization patterns? disaggregated evidence from Spain," Working Papers 1812, Banco de España.
  • Handle: RePEc:bde:wpaper:1812
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    File URL: https://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/18/Fich/dt1812e.pdf
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    Citations

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    Cited by:

    1. Juan S. Mora-Sanguinetti & Marta Martínez-Matute, 2019. "An economic analysis of court fees: evidence from the Spanish civil jurisdiction," European Journal of Law and Economics, Springer, vol. 47(3), pages 321-359, June.
    2. Juan S. Mora-Sanguinetti & Laura Hospido & Andrés Atienza-Maeso, 2024. "Is Equality Regulation Effective in Reducing Gender Gaps in the Labor Market? Quantification and Evidence for Spain," Working papers 943, Banque de France.
    3. Juan S. Mora-Sanguinetti & Javier Quintana & Isabel Soler & Rok Spruk, 2023. "Sector-level economic effects of regulatory complexity: evidence from Spain," Working Papers 2312, Banco de España.
    4. Daniel Dejuán & Juan S. Mora-Sanguinetti, 2019. "Quality of enforcement and investment decisions. Firm-level evidence from Spain," Working Papers 1927, Banco de España.
    5. Dejuan-Bitria, Daniel & Mora-Sanguinetti, Juan S., 2021. "Which legal procedure affects business investment most, and which companies are most sensitive? Evidence from microdata," Economic Modelling, Elsevier, vol. 94(C), pages 201-220.
    6. Laura Hospido & Sara Izquierdo & Margarita Machelett, 2021. "The gender gap in financial competences (556 KB)," Economic Bulletin, Banco de España, issue 1/2021.
    7. Juan S. Mora‐Sanguinetti & Rok Spruk, 2023. "Economic effects of recent experiences of federalism: Analysis of the regionalization process in Spain," Journal of Regional Science, Wiley Blackwell, vol. 63(1), pages 30-63, January.

    More about this item

    Keywords

    economic specialization; institutions; justice;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior

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