The Effect of Judicial Independence on Entrepreneurship in the US States
36 Pages Posted: 4 Mar 2014 Last revised: 20 May 2015
Date Written: June 1, 2014
The relationship between institutional quality, entrepreneurship, and economic growth has been well documented within the literature. However, much less work has been done regarding judicial independence and how this affects, specifically, entrepreneurial activity. Therefore, this paper attempts to fill that gap by exploiting the differences in judicial independence that exist between the US states and empirically evaluate how this affects entrepreneurship. Overall, the results suggest that the method of selecting and retaining justices of both courts of last resort and intermediate appellate courts has a significant and direct effect on entrepreneurial activity, though the latter result is somewhat less robust. The presence of judicial nominating and retention commissions also has a significant and direct effect. Further, although somewhat weaker, the method of selecting the chief justice of a state court of last resort would also appear to have an impact on entrepreneurship. These results are robust to a number of specifications.
Keywords: Entrepreneurship, Judicial Independence, Legal Institutions, Legal Quality, Economic Growth
JEL Classification: D78, H11, L26, O12
Suggested Citation: Suggested Citation