The Economic Costs of Ambiguous Laws

Tommaso Giommoni, Luigi Guiso, Claudio Michelacci and Massimo Morelli

No 20441, CEPR Discussion Papers from Centre for Economic Policy Research

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.

Keywords: Productivity (search for similar items in EconPapers)
JEL-codes: A10 (search for similar items in EconPapers)
Date: 2025-07
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