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The Relevance of Judicial Procedure for Economic Growth

Author

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  • Bernd Hayo

    (Philipps-University Marburg)

  • Stefan Voigt

    (Philipps-University Marburg)

Abstract

It has been argued that procedural formalism undermines economic efficiency by fostering rent-seeking and corruption. We challenge this view by arguing that a number of judicial procedures foster economic growth by increasing the predict-ability of court decisions, which leads to more transactions and higher investment levels. We investigate the effects on economic growth of 15 judicial procedures. Employing a standard growth model, we find in a cross-section of 67 countries that timeliness, written—as opposed to oral—procedures, and the right to counsel have a positive effect on growth, whereas the number of independent procedural actions as well as the presumption of innocence have negative effects. Our results partially contradict the results of former studies based on the Lex Mundi dataset.

Suggested Citation

  • Bernd Hayo & Stefan Voigt, 2008. "The Relevance of Judicial Procedure for Economic Growth," MAGKS Papers on Economics 200828, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    • Handle: RePEc:mar:magkse:200828
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    References listed on IDEAS

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    11. Feld, Lars P. & Voigt, Stefan, 2003. "Economic growth and judicial independence: cross-country evidence using a new set of indicators," European Journal of Political Economy, Elsevier, vol. 19(3), pages 497-527, September.
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    Cited by:

    1. World Bank & International Finance Corporation, 2013. "Doing Business 2014 : Understanding Regulations for Small and Medium-Size Enterprises," World Bank Publications - Books, The World Bank Group, number 16204, December.
    2. Holger Spamann, 2010. "Legal Origin, Civil Procedure, and the Quality of Contract Enforcement," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 166(1), pages 149-165, March.
    3. Stefan Voigt, 2009. "Does Arbitration Blossom when State Courts are Bad?," MAGKS Papers on Economics 200906, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    4. Voigt, Stefan, 2012. "On the optimal number of courts," International Review of Law and Economics, Elsevier, vol. 32(1), pages 49-62.
    5. Pavithra Manivannan & Susan Thomas & Bhargavi Zaveri, 2022. "Evaluating contract enforcement by courts in India: a litigant's lens," Working Papers 16, xKDR.
    6. Rizos, Anastasios & Kapopoulos, Panayotis, 2021. "Judicial Efficiency and Economic Growth: Evidence based on EU data," MPRA Paper 107861, University Library of Munich, Germany.

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    More about this item

    Keywords

    Judicial procedure; legal formalism; judicial Independence; rule of law; investment; growth.;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General
    • P51 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems

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