The Economic Costs of Ambiguous Laws

Tommaso Giommoni, Luigi Guiso, Claudio Michelacci and Massimo Morelli

No 11929, CESifo Working Paper Series from CESifo

Abstract: We develop a strategy to measure the economic costs of poorly written laws, a potential threat to the rule of law. Using the full corpus of Italian legislation, we show that legal uncertainty - measured by the probability of disagreement between the Supreme Court of Cassation and lower courts - is higher for cases involving poorly written laws and varies systematically across courts. To identify the economic impacts, we exploit a reform that reassigned firms to courts. We estimate that GDP would be 5 percent higher if laws had been written as clearly as the Constitution, with two-thirds of the loss accruing over the past 20 years.

JEL-codes: A10 E0 K00 (search for similar items in EconPapers)
Date: 2025
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