Judicial Institution, Local Protection and Market Segmentation: Evidence from the Establishment of Interprovincial Circuit Tribunals in China

29 Pages Posted: 8 Jul 2021

See all articles by Da Zhao

Da Zhao

Sichuan University

Ao Yu

Sichuan University - School of Economics

Jingyuan Guo

London School of Economics & Political Science (LSE) - London School of Economics

Date Written: June 24, 2021

Abstract

A central challenge in economic development is market segmentation (MS) within countries, which largely arises from judicial local protection(JLP). By taking advantage of China’s establishment of interprovincial circuit tribunals (ICTs) that separate the judicial system from local governments, we find that: (1) ICTs significantly rectify the JLP provided by lower-level courts. (2)A micro-mechanism analysis shows that ICTs decrease transportation costs of cases involving small and private enterprises as plaintiffs and increase the probability of the plaintiffs applying for retrials in the Supreme People’s Court (SPC). Since these enterprises are more likely to be discriminated against by lower-level courts, the rectification effect of ICTs becomes significant. (3)Consistently, although ICTs significantly decrease the MS between provinces within the same circuit area, the MS between provinces of different circuit areas barely changes. Our paper provides timely implications for countries facing similar concerns.

Keywords: Judicial institution,Local protection, Market segmentation,Interprovincial circuit tribunal

JEL Classification: K40, O17, P37, P48

Suggested Citation

Zhao, Da and Yu, Ao and Guo, Jingyuan, Judicial Institution, Local Protection and Market Segmentation: Evidence from the Establishment of Interprovincial Circuit Tribunals in China (June 24, 2021). Available at SSRN: https://ssrn.com/abstract=3873216 or http://dx.doi.org/10.2139/ssrn.3873216

Da Zhao (Contact Author)

Sichuan University ( email )

No. 24 South Section1, Yihuan Road,
Chengdu, Sichuan 610064
China

Ao Yu

Sichuan University - School of Economics ( email )

Chengdu, Sichuan
China

Jingyuan Guo

London School of Economics & Political Science (LSE) - London School of Economics ( email )

United Kingdom

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