The Relevance of Judicial Procedure for Economic Growth

36 Pages Posted: 21 Dec 2008

See all articles by Bernd Hayo

Bernd Hayo

University of Marburg - School of Business & Economics

Stefan Voigt

University of Hamburg - Institute of Law & Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: December 19, 2008

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 predictability 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.

Keywords: judicial procedure, legal formalism, judicial independence, rule of law, investment, growth

JEL Classification: H11, K40, O40, P51

Suggested Citation

Hayo, Bernd and Voigt, Stefan, The Relevance of Judicial Procedure for Economic Growth (December 19, 2008). CESifo Working Paper Series No. 2514, Available at SSRN: https://ssrn.com/abstract=1318292

Bernd Hayo

University of Marburg - School of Business & Economics ( email )

Universitaetsstr. 24
Marburg, D-35032
Germany
++49(0)6421-28-23091 (Phone)
++49(0)6421-28-23193 (Fax)

Stefan Voigt (Contact Author)

University of Hamburg - Institute of Law & Economics ( email )

Johnsallee 35
Hamburg, 20148
Germany
+49-40-428385782 (Phone)
+49-40-428386794 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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