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Do Lawyers Affect Legal Disputes in Italy? An Instrumental Variables Approach

18 Pages Posted: 28 Jan 2010 Last revised: 29 Dec 2010

Giuseppe Sobbrio

University of Messina - Institute of Economics and Finance

Elena D'Agostino

University of Messina

Emiliano Sironi

Bocconi University - Department of Economics; Catholic University of the Sacred Heart of Milan - Department of Statistical Sciences

Date Written: January 27, 2010

Abstract

The legal system can be treated as a large market where justice is traded in terms of legal disputes. Empirical evidence underlines that demand for legal assistance raises over time, despite high costs connected to filing, not only in Italy but also elsewhere in Europe. Moreover, the demand for legal services increases over time despite the high costs of filing. We argue that such increase is due to plaintiffs’ unawareness about the true cost (including delay) of filing. The reason fundamental to this situation is represented by the asymmetric information, which characterizes this environment. The client usually has poor information to value his chance for winning a dispute; hence he cannot rationally and knowingly form his own demand for legal aid. Thus, there is an adverse-selection process between lawyers and their clients that may lead to an uncontrolled increase of the demand for legal services above the rational level. As we will try to prove in this paper, such situation is emphasized in places with a higher density of lawyers, since they compete with each others in order to attract potential clients. In this paper, we use an instrumental variables approach in order to demonstrate that a high number of lawyers in a geographical area plays a significant role on the demand for new legal disputes. Results provide evidence of a positive effect of lawyers on the increase of legal disputes.

Keywords: Lawyers, Legal Disputes

JEL Classification: C33, H41, K41

Suggested Citation

Sobbrio, Giuseppe and D'Agostino, Elena and Sironi, Emiliano, Do Lawyers Affect Legal Disputes in Italy? An Instrumental Variables Approach (January 27, 2010). Paolo Baffi Centre Research Paper No. 2010-85. Available at SSRN: https://ssrn.com/abstract=1543280 or http://dx.doi.org/10.2139/ssrn.1543280

Giuseppe Sobbrio

University of Messina - Institute of Economics and Finance ( email )

Piazza Pugliatti 1
Messina
Sicilia, 98122
Italy

Elena D'Agostino

University of Messina ( email )

Piazza Pugliatti, 1
Messina, 98122
Italy
+39090719202 (Fax)

Emiliano Sironi (Contact Author)

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy
+39 02 58365365 (Phone)

Catholic University of the Sacred Heart of Milan - Department of Statistical Sciences ( email )

Largo Gemelli, 1
Via Necchi 9
Milan, MI 20123
Italy

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