Demand and Supply in Romanian Commercial Courts: Generating Information for Institutional Reform

Abstract

Institutional reform is much emphasized in transition countries, but the process of constructing workable institutions is not well understood. One element of this process that has often been neglected is the generation of empirical information that can aid in the process of institutional design. This paper examines how such information can be produced for one vital area of reform in transition and developing economies, commercial court reform. The paper estimates a supply-demand model for commercial court services in Romania. The model's construction suggests methodological problems in existing studies and the estimates quantify the possible biases, which would lead to erroneous conclusions on institutional design. The results show the simultaneous relation between congestion and caseload and the exogenous effects of resources, legal culture, options for appeal, and economic environment. Coincidentally, Romania recently implemented a reform for which the results have pertinence. The reform foreclosed options shown to be valuable to businesses. Perhaps some failures of institutional reform are due to lack of empirical input into institutional design.

Keywords: institutional reform, transition, Romania, courts, resources, caseload, delay

JEL Classification: K4, P2, K1, D7