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The Economic Costs of Ambiguous Laws

Author

Listed:
  • Tommaso Giommoni
  • Luigi Guiso
  • Claudio Michelacci
  • Massimo Morelli

Abstract

We develop a strategy to measure the economic costs of poorly written laws, a potential threat to the rule of law. Using the full corpus of Italian legislation, we show that legal uncertainty - measured by the probability of disagreement between the Supreme Court of Cassation and lower courts - is higher for cases involving poorly written laws and varies systematically across courts. To identify the economic impacts, we exploit a reform that reassigned firms to courts. We estimate that GDP would be 5 percent higher if laws had been written as clearly as the Constitution, with two-thirds of the loss accruing over the past 20 years.

Suggested Citation

  • Tommaso Giommoni & Luigi Guiso & Claudio Michelacci & Massimo Morelli, 2025. "The Economic Costs of Ambiguous Laws," CESifo Working Paper Series 11929, CESifo.
    • Handle: RePEc:ces:ceswps:_11929
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    References listed on IDEAS

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    1. Abel, Andrew B & Eberly, Janice C, 1994. "A Unified Model of Investment under Uncertainty," American Economic Review, American Economic Association, vol. 84(5), pages 1369-1384, December.
    2. Leo Katz, 2010. "A Theory of Loopholes," The Journal of Legal Studies, University of Chicago Press, vol. 39(1), pages 1-31, January.
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    More about this item

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General
    • E0 - Macroeconomics and Monetary Economics - - General
    • K00 - Law and Economics - - General - - - General (including Data Sources and Description)

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