Arbitration is No Substitute for State Courts

Stefan Voigt and Sang-min Park

Journal of Development Studies, 2013, vol. 49, issue 11, 1514-1531

Abstract: It is often conjectured that non-state dispute resolution blossoms when state courts are not independent or are perceived as low quality. This conjecture implies a substitutive relationship between state and non-state dispute resolution. This is the first study that puts these hypotheses to an empirical test. We estimate a multilevel model based on more than 10,000 surveyed firms in some 50 countries. We find that perceived quality of state courts and the frequency with which firms resort to non-state dispute resolution are positively correlated and that, hence, state courts and non-state dispute resolution are complements, rather than substitutes. The hope of some policy-makers that development can be spurred by improving the conditions for non-state dispute resolution thus appears to be in vain.

Date: 2013
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DOI: 10.1080/00220388.2013.794262

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